Raleigh-Durham Airport Authority (NC)
Airport Revenue Refunding Bonds Series 2020A (AMT), Series 2020B (Non-AMT)
January 22, 2020
SWS achieved the tightest 15-year spread for any AMT airport revenue bond issuance to date
The Series 2020AB Bonds were issued to current refund RDU’s Series 2010A, 2010B, and 2010B-1 Bonds for debt service savings. SWS also assisted RDU and the finance team with amendments to the Master Indenture to modernize certain bond provisions and provide financing flexibility while preserving RDU’s strong credit.
SWS developed a customized Excel-based structuring model that optimized the amortization of the 2020A Bonds so that it both complied with weighted average maturity requirements and also produced multiple targeted levels of annual savings. In the days leading up to pricing, the municipal and Treasury markets were mostly stable. MMD tightened by 1-3 bps on the day prior to pricing following a flight-to-quality in response to concerns over a coronavirus outbreak in China.
Given the Martin Luther King Jr. Day holiday on the Monday prior, SWS recommended pre-marketing the transaction on Tuesday (January 21) and pricing on Wednesday morning (January 22). RDU’s strong credit profile combined with positive technicals in the market, resulted in SWS marketing the refunding bonds with one rating from Moody’s. SWS developed a slides-only investor presentation which was viewed by 43 different investors, 47% of which ultimately submitted orders.
Given the slightly stronger tone in the market and positive investor feedback gathered by SWS during the pre-marketing period, SWS recommended entering the market earlier than originally scheduled on Wednesday morning. Compared to pre-marketing spreads, preliminary pricing spreads were tightened by 1-3 bps in 2030 and longer. In addition, the 2031 maturity of the Non-AMT Bonds was offered as a non-callable bond which lowered the all-in TIC and improved NPV savings.
SWS had generated $651.6 million in priority and retail orders from 56 institutional investors (3.1 times oversubscription) – 37 of whom did not previously report RDU holdings. SWS tightened spreads for most maturities from 1 to 10 basis points. SWS committed to underwrite any unsold balances, which totaled approximately $3 million at re-pricing. RDU was able to generate over $62.7 million in PV savings (22.9% of refunded par) and achieved a low all-in TIC of 1.96% on the refunding (average life of 8.4 years).
SWS achieved the tightest 15-year spread for any AMT airport revenue bond issuance to date, as well as achieving the tightest uninsured AMT and Non-AMT spreads ever for RDU. SWS also achieved Non-AMT spreads lower by as much as 8 bps compared to a AAA-rated Texas tax-exempt deal priced on the same day.