City of Houston Airport System (TX)
Subordinate Lien Revenue Refunding Bonds Series 2018C (AMT) & 2018D (Non-AMT)
July 18, 2018
SCS achieves the tightest uninsured AMT and non-AMT spreads in Houston Airport System’s history
Houston Airport System’s Series 2018C and Series 2018D Bonds were priced on July 17th, 2018 by Siebert Cisneros Shank as senior manager.
The Bonds were used to current refund all outstanding Senior Lien Bonds with Subordinate Lien Bonds, eliminate the Airport System’s outstanding auction rate securities, and to increase the cash balance on the Subordinate Lien Reserve Fund by transferring approximately $33 million of cash from the Senior lien Bond Reserve Fund. The Bonds are secured by Lien on the net revenues of Houston Airport System, junior and subordinate to the lien securing Senior Lien Bonds and Senior Lien Notes (upon the issuance of the Series 2018CD Bonds and the refunding of the Series 2009A Bonds).
SCS developed a slides-only investor presentation which was viewed by 35 different investors and 22 of these investors submitted orders.
Leading up to pricing, SCS worked with the financial advisors to evaluate the effectiveness of bond insurance, the use of alternative couponing on an option adjusted basis and the use of open market securities in the escrow. The City ultimately bid out the escrow and purchased open market securities which generated additional net NPV savings of $250,000.
While the issuance volume for the week of pricing was expected over $9.5 billion, SCS launched the order period with aggressive pricing levels with the knowledge that municipal investors in Texas are flush with reinvestment proceeds in August and eagerly looking for a place to reinvest their cash. SCS ultimately received $2.46 billion in priority orders from over 80 different investors.
As result of the syndicate’s strong pre-marketing effort and aggressive pricing strategy, the bonds were almost 4.0x oversubscribed and spreads were reduced by as much as 7 basis points at reprice.
SCS achieved the tightest uninsured AMT and non-AMT spreads in HAS’s history, including spreads that were up to 19 bps tighter than their Series 2018A&B Bonds which priced 4 months earlier.
The Series 2018CD Bonds generated net present value savings of $90.3 million (13.8% of refunded bonds).