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City of Los Angeles (CA)



Wastewater System Subordinate Revenue Bonds, Series 2018-A (Green Bonds) Refunding Series 2018-B

October 31, 2018


Image by Sam Mgrdichian


  • Proceeds from the Series 2018-A (Green Bonds) Subordinate Bonds were used to finance the construction and improvement of the System and pay all outstanding Wastewater System Commercial Paper (CP) Notes.

  • Proceeds from the Series 2018-B Subordinate Bonds were used to refund a portion of the Wastewater System Subordinate Revenue Bonds, Variable Rate Refunding Series 2012-D and pay all or a portion of the swap termination payments.

  • In addition, the City intends to issue Wastewater System Subordinate Revenue Bonds, Variable Rate Refunding Series 2018-C to refund the remaining portion of the 2012-D Bonds not refunded by the 2018-B Bonds.

Market Conditions

  • Throughout the month of October, volatility continued to increase in both fixed income and equities due to trade and protectionism concerns and market’s view of the Fed continuing with additional rate hikes.

  • Redemptions and bid-lists continued to be elevated, but higher rates allowed for continued tax-loss swapping in addition to increased customer buying.

  • Primary issuance reached about $6.8 billion for negotiated transactions, and approximately $700 million for competitive transactions.

  • There was a soft tone in the market on the day of pricing, with MMD cuts across the entire curve; some deals scheduled during the same pricing week were either pulled out of the market, with their transaction size decreased or yields raised substantially during repricing.


  • SCS developed a slides-only investor presentation which was viewed by an array of professional retail and institutional investors of which almost half of these investors submitted orders.

  • In addition, SCS evaluated the effectiveness of an alternative couponing structure and sold three non-callable maturities with 3% coupons to retail investors.

  • SCS ultimately took more than $5.2 million bonds into inventory.


  • SCS worked with the City to take out the swap and de-risk the hedged portion of the 2012-D variable rate direct purchase bonds with the proceeds of the Series 2018-B Bonds.

  • The swap termination payments were funded with fixed-rate 2018-B bond proceeds together with available City funds.

  • The City will no longer have any swap exposure

Pricing Results

  • SCS ultimately received over $753 million orders from 42 different professional retail and institutional investors

  • As a result of the syndicate’s strong pre-marketing effort and aggressive pricing strategy, the bonds were over 2.0x oversubscribed

  • In spite of a weaker market tone the day of pricing, SCS was able to maintain spreads ranging from -25 to -1 through 2033

  • The Series 2018-B Bonds generated net present value savings of over $1.2 million (0.81% of refunded bonds) after accounting for the swap termination payment

  • The spreads to MMD on the Series 2018 Bonds were tighter by up to 26 bps, compared to the City’s transaction priced in May 2017

Pricing: ROP: October 29, 2018
IOP: October 30, 2018
Closing: November 15, 2018
Ratings: AA/AA/AA (S&P/Fitch/Kroll)

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