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Philadelphia Authority for Industrial Development (PA)



City Service Agreement Revenue Bonds, Series 2018

November 21, 2018


Image by Sam Mgrdichian

PAID issues bonds for the Rebuild Program—the Philadelphia’s design and construction project to provide greater recreational and educational opportunities for Philadelphia citizens

Transaction Overview

Proceeds from the issuance will be used for the Rebuild Program, the City’s design and construction project to provide greater recreational and educational opportunities for Philadelphia citizens.

  • The project includes improvements to, and construction, demolition, renovation and equipping of the City’s parks, libraries, playgrounds, recreation centers and other related facilities and will enhance quality and delivery of services.

  • Given the City’s materially improved financial position at fiscal year 2018 end, Moody’s revised its outlook from negative to stable.

Market Conditions
  • In the week leading up to pricing, municipal bonds traded to lower yields, mostly in conjunction with lower Treasury yields’, with the Thanksgiving holiday, approaching the municipal calendar was light, totaling approximately $1.1 billion.

  • The week before pricing, the muni market improved 6 – 9 bps and was stronger all 4 days (market closed for Veteran’s Day).

  • The volatility from the equity markets carried over to the fixed-income markets but the results were generally positive.

  • The equity markets were expecting a large sell off at the open on pricing day so the bond markets were stronger as we prepared to price by 1 – 2 bps.

  • Given certain schedule constraints including the election, the City’s water credit pricing and a mandatory November closing date, SCS and the City opted to price the bonds the Tuesday before Thanksgiving.

  • SCS led an aggressive marketing campaign the week prior to ensure the transaction would not get lost in the holiday shuffle.

  • To broaden the buyer base and attract impact investors, SCS highlighted the positive community impact of the Rebuild program, as well as complementary efforts from the City to further invest in strengthening the K-12 system, improving public safety and expanding recreational facilities.

  • SCS also received investor reads both the day before and the day of pricing, indicating interest from 20 different investors of which 12 submitted orders.

Pricing Results
  • SCS ultimately received over $376 million orders from 29 different professional retail and institutional investors.
    – 22 of these investors were not among the top 20 holders of the City Service Agreement or GO bonds1

  • As a result of the syndicate’s strong pre-marketing effort and aggressive pricing strategy, the bonds were 4.7x oversubscribed.

  • SCS was able to bump by 2 – 7 bps across the curve, in spite of the City’s largest existing holder1 not participating.

1 as reported by eMaxx

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