This transaction represents SWS’s 18th senior managed transaction for LADWP. The Bonds were issued to provide funds to 1.) pay costs of capital improvements to the Power System and 2.) current refund the Series 2016A and 2016B Bonds.

The Bonds were all structured as serial bonds; 5% coupons for all maturities besides the 2056 maturity, which was structured with a 5.25% coupon to attract the largest universe of investors who were seeking premium protection, optional redemption date on July 1, 2035, refunding structured to generate level debt service savings through the final maturity of refunded bonds (2047).

Pricing was scheduled during the week of the Martin Luther King Jr. Day holiday, Monday, January 19th . Investors had cash to put to work after limited new issue supply over the preceding three weeks with municipal fund inflows of $6.3 billion since the holiday break (the “January effect”). During the week of pricing, municipal issuance was projected to be $11 billion with $7.5 billion of negotiated supply. SWS collaborated on the development of the investor roadshow, which received 39 unique views from 34 institutional investors.

There was some volatility the day prior to the Retail Order Period (“ROP”), with tax-exempt interest rates increasing 2 bps from 2027 to 2028, 4 bps from 2029 to 2030, 5 bps from 2031 to 2040, and 7 bps from 2041 to 2056, respectively. Market volatility persisted throughout the ROP due to geopolitical concerns while President Trump was giving his speech in Davos. All maturities were offered for the ROP, resulting in $83.7 million of orders across 21 of the 24 maturities*. There were $81.4 million of professional retail (SMAs) orders and $2.3 million from true “mom and pop” retail.

As geopolitical concerns were allayed, the market tone was unchanged at best, and SWS recommended starting the IOP at the same levels to build a book. At these levels, the pricing spreads for the Power System credit were up to 10 basis points lower than the prior deal priced in October. At the conclusion of the IOP, $925.6 million in priority orders were received.

In total, the pricing generated $1.0 billion in priority orders and all but three maturities were fully subscribed for; 13 maturities were at least 2x oversubscribed and40 investors placed orders in the ROP & IOP. Based on the strength of the order book, SWS had recommended a repricing of 1 to 3 basis points lower in various maturities. However, LADWP wanted SWS to explore upsizing opportunities given the already favorable pricing relative to recent deals. With a volatile market, SWS’s sales desk had to expeditiously relay this upsizing opportunity to investors; the firm’s upper management and sales desk were on hand to immediately provide a response. 

The transaction was upsized by $227.7 million to lock in these favorable interest rates. For those maturities that were not upsized, they were repriced 1 to 3 basis points lower (2027 to 2032). SWS stepped up to underwrite $26.9 million of unsold balances without any pricing adjustments. After re-pricing adjustments, the current refunding generated PV savings of $40.3 million (10.6% of refunded par).

Overall, the transaction produced an all-in TIC of 4.18% and total debt service of $1.37 billion.

Read Bond Buyer article on this transaction here: https://www.bondbuyer.com/news/los-angeles-dwp-pricing-gains-traction-after-wildfire