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Los Angeles Department of Water & Power



Power System Revenue Bonds, 2024, Series A

March 13, 2024


Image by Sam Mgrdichian

The Bonds were issued to current refund the Series 2014C, 2014D, and 2014E Bonds. Initially structured to refund 50% of each maturity, leaving the balance for a future refunding. Debt service savings were structured uniformly to generate level cash flow savings through the final maturity (2044).

SWS scheduled an early pricing the morning of Wednesday, March 13th in order to be released prior to the large $2.9 billion DASNY pricing and wrap up the transaction before the results of the 30 year US Treasury auction. SWS led the development of the investor roadshow, which received 52 unique views from 38 institutional investors.

All maturities were offered for the Retail Order Period (“ROP”), and every maturity received orders (7 maturities fully subscribed). There were $263.90 million of retail orders from 38 SMAs (professional retail investors) and $3.58 million from true “mom and pop” retail.

After a successful Retail Order Period, SWS recommended to enter the Institutional Order Period with no changes in yield. The US Treasury market was 2-3 basis points higher in yield prior to pricing. At the conclusion of the IOP, $353.04 million in priority orders were received.

In total, the pricing generated a total of $616.94 million in priority orders and all but three maturities were fully subscribed for 54 investors placed orders in ROP & IOP, with 12 potential new investors. Of those, 7 investors submitted orders for both their professional retail fund and bond fund. Of the investors that viewed the investor roadshow, 10 placed orders. After re-pricing adjustments, the current refunding generated PV savings of $68.0 million (15.9% of refunded par) and approximately $4.2 million in average annual cash flow savings through 2044. The inverted yield curve helped generate $2.9 million in positive arbitrage for the refunding escrow. SWS stepped up to underwrite $32.67 million in unsold bonds for LADWP and did not ask for a change in yield. Given the success of the transaction, LADWP decided to expedite another refinancing transaction to the following week, following SWS’ leadership.

Given the strong recommendations at repricing, LADWP opted to upsize 2029, 2033-35, and 2040 maturities to refund more bonds; SWS kept the lower yield adjustments despite MMD not being adjusted and Treasury market being weaker. LADWP also had flexibility to adjust the refunded par amount in 2025 and 2038, which had lower subscription. In aggregate, the transaction increased by $20.44 million. Additionally, on the day of pricing, SWS was asked to adjust the refunded par for the 2014C, 2014D, and 2014E bonds. Instead of refunding 50% of each maturity for each series, SWS refunded entire maturities for one series first (to minimize administrative burden) – as a result, the 2014E bonds were fully refunded, while the 2014C and 2014D bonds were partially refunded.

SWS’ team quickly completed the optimized refunding structure to allow for an updated re-pricing wire before the US Treasury auction was completed within the next half hour. Upon completion of the optimized refinancing structure, the refunding par amount was upsized by $21.4 million and total PV savings increased by $7.9 million, from $60.1 million to $68.0 million.

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