Pennsylvania State Public School Building Authority
College Revenue Bonds (Community College of Allegheny County Project), Series of 2020
June 2, 2020
The Authority’s second sale since November 2019 for the Community College of Allegheny County
Proceeds of the Series of 2020 Bonds were used to provide funds for the acquisition, design, construction, and furnishing, amongst other expenses, related to building the new Allegheny Workforce Training Center (Phase Two); and, pay the costs of issuing and insuring the Bonds.
The Authority will enter into a Loan Agreement with the Community College of Allegheny County in which the Authority will lend the Bond proceeds to the College for the purpose of paying costs. The Bonds will be secured under an Indenture by the assignment and pledge to the Trustee of the payments, and the full faith and credit of the College is pledged for the timely payment of all amounts due.
SWS worked closely with the financial advisor to develop a new money bond structure to meet the College’s targets, which consisted of serial maturities from 2021-2039 with a mixture of 3% to 5% coupons throughout the 19 years. SWS and the College’s financial advisor also determined that it would be cost-effective to utilize bond insurance to lower all-in cost and satisfy investor demand.
The week of pricing had about $6.5 billion of issuances in the market, approximately $3.0 billion of which were taxable financings. On May 29, 2020, historical MMD lows were reached on the 1- and 5-year MMD of 0.11% and 0.38%, respectively. Since the week before pricing, the 1-year MMD rose by 5 bps and the 2-year MMD increased by 3 bps, with the remainder of the curve staying unchanged.
There was limited uptake by investors due to the size, the College’s credit, and the broader higher education landscape’s credit. SWS recommended employing 4% coupons on the long end to solicit investor feedback for 2035-2039.
The transaction received selective interest, garnering orders from 5 investors – one of whom was a return buyer from the November 2019 CCAC transaction SWS sole managed. The transaction was oversubscribed by 1.4x in 2021, subscribed by 1.0x in 2024-2025 and 2037-2039, and undersubscribed by 0.9x in 2022-2023. To showcase its continued commitment to the Authority and College, SWS underwrote $8.6 million of the Bonds. The College achieved a true interest cost of 2.445% on this transaction.