State of California
Various Purpose General Obligation Bonds (Federally Taxable)
March 8, 2023
JOINT SENIOR MANAGER
This important engagement represented SWS’ 22nd senior managed transaction for the State Treasurer’s Office (“STO”) and State-related Agencies/Issuers. This was the State’s first negotiated taxable GO financing since 2018. The bond proceeds will current refund commercial paper notes and provide new money for projects including the landmark High Speed Rail project.
Select Transaction Highlights
SWS led the development of the investor presentation, which will serve as the template for the State’s upcoming issuances this season. SWS collaborated closely with the STO and its Municipal Advisor to craft a nuanced narrative detailing the State’s updates regarding the 2023-24 Governor's Budget, management of their reserves, debt, and liabilities, priority of payments, and the strength of the State's economy.
The investor presentation was viewed by 33 unique investors, with 12 of those investors placing orders during pricing. Ahead of the Indications of Interest order period on Tuesday, Federal Reserve Chairman Powell made comments suggesting there would be higher future rate increases than previously expected. US Treasuries opened with higher yields in anticipation of his comments and rates continued to climb higher after Chair Powell’s comments, especially in the front end of the yield curve. This movement significantly affected the commitment of several investors who had previously expressed interest.
The Joint Senior Managers continued to conduct investor marketing, emphasizing the State’s attractive credit attributes, during the order period on Tuesday and before coupon set on Wednesday to keep key investors engaged as yields were lowered.
Sales Performance and Pricing Results
The Joint Senior Managers created a global marketing strategy including an optimal combination of index-eligible bonds, par/discount/premium structuring, and make whole and 10-year par call bonds. During the institutional order period, SWS’ jointly-let syndicate generated $6.81 billion in orders from 137 investors (3.8x oversubscription) including unique institutional orders generated by SWS– a testament to the syndicate’s thorough marketing efforts before and during pricing. Strong demand generated for the State’s bonds enabled the syndicate to lower pricing spreads by 2 to 15 basis points (.02%-.15%) for all maturities from Indications of Interest to Coupon Set. The State was able to lock in an all-in TIC of 5.30%.