West Palm Beach Community Redevelopment Agency
Tax Increment Revenue and Revenue Refunding Bonds, Series 2019 (City Center Community Redevelopment Area)
June 4, 2019
Siebert Cisneros Shank served as senior manager for this transaction for the West Palm Beach Community Redevelopment Agency which priced on June 12, 2019. The Bonds are rated “A (Stable) / AA- (Stable)” by S&P and Fitch, respectively.
The Series 2019 Bonds were issued:
To finance certain capital improvements within the City Center Community Redevelopment Area (“CCCRA”) in conformance with the CCCRA Redevelopment Plan, including the streetscape and alleyway improvements in the tax increment district, and to the extent permissible, reimbursement to the Agency of any moneys previously advanced by the Agency to pay such costs,
to advance refund $24.3 million of the Series 2006A Bonds for $4.0 million in NPV savings,
to make a deposit to the CCCRA Debt Service Reserve Subaccount to satisfy any increase in the Reserve Requirement resulting from the issuance of the Series 2019 Bonds, and
to pay the costs of issuing the Series 2019 Bonds.
Market Tone and Pre-Marketing
On Monday, June 10, MMD was weaker by 1 – 3 bps across the curve, with the market gearing up for about $10 billion in new issuance volume to make it one of the busiest weeks in the year.
SCS proposed a pre-marketing scale that was through the consensus scale by between 1 – 2 bps in the 2026 – 2036 maturities. After conversations with the Agency and its Financial Advisor, SCS agreed to lower the spreads by 2 – 3 bps from the proposed premarketing scale with the goal of pre-marketing the bonds with this revised scale to gauge investor interest.
During the pre-marketing period, initial feedback was slow with some investors asking for additional information relating to the credit of the issuer. Market tone on the day of the institutional pricing was good, with the equity markets rallying and CPI numbers up 0.1 (in line with expectations) so SCS proposed going to the market with the same scale from the pre-marketing period despite having limited feedback.
The order period was very slow and by the end of the order period we had secured $70.7 million in of orders, as seen in the chart below on a maturity-by-maturity basis, leaving a balance in excess of $27 million in bonds. As illustrated, the majority of those maturities that had orders were minimally oversubscribed (if at all) comprised of very few investors per maturity.
SCS requested an increase in spreads by 2 bps in 2027 and 3 bps in 2028 and longer (as there was only one investor in the 2033 – 2036 maturities, SCS needed to increase yields in these maturities to preserve those orders) and agreed to underwrite the balance, $27 million or 30% of the par, while leaving the order period open for the balance of the day allowing all syndicate members to continue to place orders.
In addition to the aggressive pricing levels agreed to by SCS (which resulted in slow order flow), the large new-issue supply the week of pricing gave investors many options other than the Agency’s bonds; this resulted in many other transactions repricing to higher yields.
In total, 10 different investors placed orders for the Agency’s bonds, all of which were not previous holders of the Agency’s outstanding bonds. The Agency generated approximately $4.0 million in Net Present Value savings (16.5% of refunded par) on the refunding with an All-In-TIC of 2.87%.