New York State Thruway Authority
General Revenue Junior Indebtedness Obligations, Series 2019B
October 18, 2019
Purpose. The Series 2019B JIOs were issued as part of a multi-year, multi-credit financing plan, the proceeds of which funded the New NY Bridge Project and the construction of the Gov. Mario M. Cuomo Bridge (the replacement for the Tappan Zee Bridge). Specifically, the Series 2019B JIOs refunded the NYSTA’s outstanding $1.6 billion TIFIA loan and provided $75 million of new money funding to complete certain remaining construction costs. In addition, proceeds of the Series 2019B JIOs were used to fund capitalized interest, to purchase a surety policy, and to pay other costs of issuance.
Security. The Series 2019B JIOs are special obligations of the Authority, secured by a junior pledge of Thruway System revenues (principally derived from tolls). The Series 2019B JIOs will be further secured by a DSRF surety policy from AGM. In addition, a portion of the term bonds in 2045, 2046, 2050, and 2053 were offered with AGM insurance.
Structuring. The Series 2019B JIOs were structured with serial bonds in 2021 through 2040 and term bonds in 2041, 2045, 2046, 2050, and 2053. The serial bonds maturing in 2037 through 2039 as well as all of the term bonds were originally offered with 4% coupons, with the exception of the 2053 term bond, which was originally offered with a 3% coupon. Based on investor demand, a portion of the par in 2045 was moved into 2046 (a maturity not originally offered to investors) and the 2053 was bifurcated to offer both 3% and 4% coupons in both maturities. All of the bonds have a 10-year par call.
Marketing. In addition to its role of marketing the transaction to investors and generating orders, SCS was responsible for developing an investor presentation for the transaction. The 23-slide slides-only presentation (a deviation from the Authority’s normal practice of using a voice-over presentation) provided a streamlined demonstration of the Authority’s recent performance, an update on the New NY Bridge Project, a competitive analysis of the Authority versus its regional peers, and a summary of the transaction’s (and the Authority’s) strong legal and credit security. The presentation was viewed by over 45 individuals from 39 separate institutions, a number of which submitted substantial orders.
Market Conditions. During the week prior to pricing, the market was relatively soft as yields on the 10-year US Treasury and MMD continued to weaken, reaching 1.75% and 1.40%, respectively. Just prior to pricing, as positive comments regarding the trade war with China and a possible Brexit deal put positive price pressure on equities, both the tax-exempt and the taxable markets continued to weaken, with the 10-year US Treasury and MMD yield eventually reaching 1.78% and 1.45%, respectively.
Pricing Results. Due to the backloaded structure, $151 million in orders were placed during the retail order period; the vast majority of which were in the first 10 years. Oversubscriptions were up to 5x in certain early maturities. After widening certain of the later maturities going into preliminary pricing, the syndicate was able to secure a substantial order book. This book allowed the underwriters to tighten spreads on certain maturities by up to 4 bps, and resulted in spreads that were, on average, lower than originally stated at pre-marketing. The final structure resulted in net present value savings of $175 million, or 10.9% of refunded par.