This transaction is SWS’ second senior managed mandate for San Antonio ISD.

Concurrently with pricing, SWS bankers led a Bonds 101 presentation for San Antonio ISD students from various campuses and finance staff.

Proceeds from the bonds will be used for acquisition and update of technology equipment and to refund a portion of the District’s Series 2014B, Series 2015 and Series 2018 Bonds.

The District received underlying ratings of Aa2 (stable) from Moody’s and AA (stable) from Fitch. The Bonds are also guaranteed by the Texas Permanent School Fund (AAA-rated).

While early to mid-June featured a rally in both treasuries and munis with treasuries dropping its yields by 25-35 bps, rates began moving up for both benchmarks in July as new issuance supply picked up, especially in the Texas market. The week prior to pricing, MMD rates soared by as much as 20 basis points on the long end of the curve, deeming some of the District’s refunding candidates out-of-the money.

As a result of this challenging market, deals struggled to get done and balance sheets were put to work to shore up the pricing of deals, especially Wednesday and Thursday, with 2032-2038 being the most difficult part of the curve.

On Monday of the week of pricing, treasuries rallied and MMD received some favorable adjustments with 2 bps better through 20-years and 4 bps better on the long end. Although the tone was more constructive at the start of pricing week, investors were still sensitive to pricing action.

The Texas calendar for the week remained high at a par of $3.4 billion as a flurry of Texas ISD deals entered the market, representing nearly half of the Texas market at $1.6 billion in par, in advance of effectuation of property tax legislation affecting school finance provisions.  The District’s transaction represented the 2nd largest deal of the week in a crowded market where PSF fatigue was already looming amongst investors.

SWS’ head underwriter put together a premarketing scale based on the consensus spreads from the syndicate’s price views and in line with $207 million Forney ISD’s preliminary pricing, which accelerated its pricing to Monday.

Despite 5.25% coupons on other deals like Forney ISD, SWS’ desk elected an aggressive approach by using 5.00% coupons since a substantial portion of San Antonio ISD’s was the refunding component. SWS received 32 investor reads throughout the premarketing period.

The SWS-led syndicate generated nearly $925 million in orders from 35 distinct investors. Overall, the transactions was 4.4x oversubscribed. All maturities were oversubscribed. At reprice, SWS’ head underwriter recommended yield reductions ranging from 1 to 7 bps on all but three maturities (2036-2038).

Overall, the District achieved an All-in-TIC of 4.075% and a TIC of 4.026%. On the new money portion, the District achieve an All-In-TIC of 3.839% and a TIC of 3.774%. On the refunding component, the District achieved Net PV savings of $11.171 million (6.206% of refunded par). 

SWS’ spread reductions resulted in the District securing an additional $311K in PV savings (or an additional 0.17% of refunded par) on the refunding component.

In a head-to-head, same-day pricing comparison with Alvin ISD’s $101 million issuance (PSF AAA / Underlying Aa2/AA) on certain comparable maturities with similar coupons, SWS achieved better spreads by an aggregate 57 basis points.