District of Columbia
General Obligation Refunding Bonds, Series 2017A
May 18, 2017
SCS priced and sold these bonds at the tightest spreads ever achieved in the history of the District of Columbia’s GO credit
In May 2017, Siebert Cisneros Shank senior managed the District of Columbia’s, Series 2017A Bonds which were issued to currently refund a portion of DC’s outstanding Series 2007A GO Bonds and all of the outstanding Series 2007B GO Bonds.
The District met with rating agencies in March prior to naming the underwriting team. Moody’s and Fitch affirmed the District’s Aa1/AA ratings with “stable” outlooks. S&P also affirmed an AA rating and upgraded their outlook to “positive”.
SCS assisted the District in creating an investor presentation that was posted online concurrently with the release of the POS. Ten of the sixteen investors who viewed it placed orders for the District’s transaction. SCS presented the District with various structuring alternatives. The District selected the structure that produced level savings by refunded series and generated the largest PV savings.
In the weeks leading up to the pricing, MMD steadily increased from lows in mid-April, due to news surrounding the French election and media attention surrounding the Trump White House. However, the municipal market experienced a reversal in these increases prior to pricing, owing to positive technicals from future calls and redemptions.
On Monday and Tuesday, our sales force heavily marketed this transaction to investors in order to gauge investor interest in 4% coupons in the longer maturities.
Leading into pricing, there was a positive market tone with deals being well-received despite the large supply expected for the week ($8.8B). The MMD was at its richest levels of the year versus Treasuries.
The morning of pricing, SCS entered the market with the aggressive spreads from the pre-marketing wire and recommended pushing up the order period to take full advantage of the positive market tone. Investors were very attracted to the deal due to the District’s strong credit. The transaction received over $2.43 billion in priority orders from 112 different investors of which up to 80 were not among the existing reported holders of the credit. SCS placed more than $2.35 billion in priority orders (97% of total priority orders). The Bonds were oversubscribed for by 3 to 8x, allowing us to tighten spreads.
These re-pricing yields resulted in spreads of between 2 and 20 bps—the tightest spreads ever achieved in the history of the District’s GO credit. Final spreads were up to 30 bps tighter than the District’s last transaction that priced in November 2016.
The refunding generated over $103 million in PV savings (15.75% of refunded par) and an all-in TIC of 3.50%. Strong investor outreach and sales force marketing combined with the working group’s ability stay on schedule, enabled the transaction to price in optimal market conditions leading to significant savings for the District.