Michigan State Building Authority
Revenue Bonds, Series I (Facilities Program)
June 29, 2021
Proceeds of the Bonds were used to refund certain outstanding commercial paper notes and to pay additional costs of new facilities construction and improvements. The Fixed Rate Bonds were structured with semi-annual serials from 2022 through 2026 and term bonds in 2038-2041, 2046, 2051, and 2056. Optimally structured utilizing a mix of 2.625%, 3% and 4% coupons which allowed for the efficient use of lease revenues and to attract the largest number of investors.
Market Conditions: Leading up to pricing, the market was relatively stable with municipal new issuance supply for the week of June 28th totaling $6.3 billion. On the day of pricing, 10 and 30-year “AAA” MMD rates were 1.01% and 1.52%, respectively, while the 10- and 30-year US Treasury rates were 1.49% and 2.10%, respectively.
Marketing and Pricing Strategy: The POS and investor presentation were posted 11 days prior to pricing and were viewed by 30 unique investors. SWS tailored the couponing structure to target specific investor interest and maximize overall demand by diversifying the investor base. A majority of order flow was received from a mix of investor types, including SMAs, bond funds, bank portfolios, prop/trading firms and hedge funds. The transaction was received well in the market and attracted broad investor demand for the Bonds. Strong subscription levels allowed SWS to tighten spreads 1 to 2 basis points for maturities in years 1 through 5 and tighten 1 bps in year 30.
Historically Low All-In TIC: Compared to other recent 35-year fixed-rate offerings, the 2021 Series I Bonds priced with the lowest All-In TIC in SBA's history at 2.70%.
The transaction was well received in the market attracting approximately $390 million in orders from 32 different institutional investors.