LAWA achieves a lower 25 – 30 year AMT spread than any previous airport financing as of the day of pricing

Siebert Cisneros Shank served as senior manager for Department of Airports of the City of Los Angeles’ (LAWA) 2018 Series C bonds which priced on July 12th, 2018.

Proceeds of the Series 2018C Bonds were used to fund a portion of LAWA’s $10.7 billion CIP, including the North Terminal Improvement Program as well as Terminal 1 and Terminals 6/7/8 Improvement Projects. The Series 2018C Bonds are secured by a pledge of Subordinate Pledged Revenues and rated A1/AA-/AA-.

SCS worked closely with Airport management and the Municipal Advisors to create a slides-only investor presentation, which was viewed by over 30 investors; 14 of these investors submitted orders.

In the months leading up to pricing, SCS evaluated multiple call and alternative couponing structures for the Series 2018C Bonds; LAWA ultimately used a 9.5-year call structure and the 2020 maturity used a 5.75% coupon. SCS also provided LAWA and the financing team with detailed targeted investor information including current holders and airport holder cash flows as well as recent buyers of shorter calls.

In the week leading up to pricing Treasuries had been trading in a tight range; on the day of pricing, the municipal market was slightly stronger on the front end of the yield curve while the long end was relatively unchanged. SCS recommended that LAWA enter the market with the goal of attracting the greatest amount of interest to build a robust book of orders. At the end of the order period, given the remaining balances in the 2024 – 25 serial maturities, SCS committed to underwriting approximately $13 million of the bonds to maintain the integrity of the scale.

As a result of the syndicate’s strong pre-marketing effort and pricing strategy, the bonds were up to 3x subscribed in the 2019-38 serial maturities and 5x oversubscribed in the 2044 term bond.
Given the $1.2 billion in orders from 44 different investors, the 2028 – 38 serial maturities were repriced 1 – 3 basis points tighter in spread and the 2044 term bond was repriced 4 basis points tighter in spread. This resulted in the lowest ever 25 – 30 year AMT spread for an airport financing as of the day of pricing and the tightest subordinate lien spreads across the curve for LAWA.