Los Angeles Department of Water and Power
Water System Revenue Bonds, 2022 Series C
June 2, 2022
This transaction represented SWS’ 16th senior managed transaction for LADWP
The Bonds were issued to current refund outstanding bonds for debt service savings and to provide approximately $41 million for new money purposes -- although the Bonds are one series, there were two structuring components for each purpose.
To help LADWP sell its credit story in changing markets, SWS volunteered to draft LADWP’s first investor presentation since the COVID-19 pandemic.
SWS provided significant structuring work to simultaneously achieve both refunding and new money purposes of this issuance.
The current refunding was structured to generate uniform debt service savings, and the new money component was structured to avoid principal amortization during LADWP’s peak annual debt service years (2028 – 2033) and fill in principal amortization through a barbell type of structure around the principal amortization of the refunding to produce an overall debt profile that gradually declines in annual debt service on and after 2037.
The investor presentation was viewed by 37 investors, with 5 of those investors placing orders during pricing.
While the first four months of 2022 saw significant volatility with interest rates increasing on average 136 basis points from the beginning of the year, the two weeks preceding the week of pricing saw a welcomed reversal. During the retail order period, SWS generated over $321 million in retail orders, including $302 million from 36 unique professional retail investors (such as SMAs) and $19 million from true individual retail investors.
During the institutional order period, SWS generated over $479 million in institutional orders from 49 unique investors (total 2.4x oversubscription) with potentially 17 new investors.
Oversubscription allowed SWS to lower pricing spreads by 3 to 7 basis points for the 2023 – 2025 and 2034 – 2036 maturities and 1 basis point each for the 2042 and 2043 maturities. The Bonds achieved an all-in TIC of 3.63%, and the refunding achieved approximately $60.59 million in NPV savings, or 17.76% of the refunded par.