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Michigan Strategic Fund



Limited Obligation Revenue Refunding Bonds, Series 2022 (Federally Taxable)

March 2, 2022


Image by Sam Mgrdichian

The proceeds of the Bonds will be used to: (i) refund and defease the Issuer’s Limited Obligation Revenue Bonds (State of Michigan Cadillac Place Office Building Project), Series 2011 and (ii) pay costs of issuance with respect to the Bonds.

Fixed Rate Bonds were structured with semi-annual principal from October 15, 2022 through. October 15, 2024 and annual principal from October 15, 2025 through October 15, 2029. On April 15, 2030, there was one final maturity. SWS worked closely with the State and its Municipal Advisor to structure lease revenues sufficient to pay debt service on the Series 2022 Bonds. 

Due to extreme volatility in the U.S. Treasury market as a result of the Russian invasion of Ukraine, SWS elected to come to market with a mix of semi-annual and annual principal payments to offer larger blocks of bonds to investors, increasing overall investor interest and order flow. The transaction was well received attracting a total of $142 million in priority orders from 20 unique institutional investors.

The transaction generated over $10.2 million Present Value Savings (12% of refunded par) at low All-In TIC of 2.74%. 

Leading up to pricing, the market was extremely volatile with U.S. Treasury rates swinging by 10-15 basis points due to the risk and overall uncertainty surrounding the Russian invasion of Ukraine and continued inflationary pressure within the U.S. On the day of pricing the 2- and 10-year U.S. Treasury rates were 1.50% and 1.86%, respectively. 

The POS and investor presentation were posted 7 days prior to pricing and were viewed by 50 unique investors. SWS elected to come to market with a mix of semi-annual and annual principal payments in order to have larger blocks of bonds to sell investors and increase investor interest due to the overall market volatility. 

The transaction was well received in the market with a total of $151.66 million orders received from a mix of investors including insurance, bond funds, SMA’s, municipalities, and bank portfolios, among others. Subscription levels ranged from 1.0x to a high of 5.8x for the 10/15/2022 maturity. Strong investor interest allowed SWS to tighten spreads two to six basis points in the first three maturities.

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