First stand-alone stormwater transaction in the U.S. to receive Climate Bond Certification

On December 6, 2018, SCS served as book-running senior manager for the City’s inaugural Stormwater Revenue Bonds transaction which was rated Aa2 by Moody’s and AA+ by S&P.

This was the City’s first transaction to receive green bond designation and the first stand-alone stormwater transaction in the U.S. to receive Climate Bond Certification. Proceeds from the Bonds will be used to upgrade and improve the City’s stormwater system, part of a $95 million investment over the next five years to address flooding and stormwater drainage issues. The Bonds are secured solely by the Net Revenues of the System including Stormwater Fees collected based on a property’s impervious area.

In advance of the transaction, SCS worked closely with the City and the working group to:

• Evaluate alternatives for designating the bonds “green”—self designation, second-party opinion or certification by the Climate Bond Initiative;

• develop the verification letter from Sustainalytics;

• establish the Master Bond Ordinance for the new credit; and

• obtain a financial feasibility report from Black & Veatch

Pricing was originally scheduled for December 5th, however, due to the passing of President George H.W. Bush and the closing of the equity and bond markets, SCS coordinated with the City and FA and recommended to pre-market the bonds on Tuesday (12/4) and price Thursday (12/6) , which ensured that investors had ample time to review and approve the credit during one of the last heavy calendars of the year ($9+ billion).

The Bonds were pre-marketed on Tuesday with both 5% and 4% coupons to attract multiple investor types and in response to early interest from State Farm Insurance for lower coupon bonds.

On Tuesday, the bond market rallied after trade war tensions with China escalated significantly due to the US arrest of Huawei executive Meng Wanzhou; MMD tightened 2 – 4 bps in 2020 – 2021, 6 – 7 bps from 2021 – 2027, and 8 bps from 2028 – 2048.

SCS released the pre-pricing wire reflecting the significant tightening in MMD On Thursday (12/6).

After the order period, the 2021 to 2048 maturities ranged from 1.3x to 6.2x times oversubscribed based on priority orders; the transaction was 4.5x times oversubscribed on aggregate and generated more than $170 million of priority orders, all of which came from SCS, however the 2020 maturity did not garner any priority orders by the end of the order period given the volatility on the short-end of the curve so SCS took the entire maturity into inventory.