October 19, 2018
KNN Public Finance
On Tuesday, October 2nd, KNN advisors assisted the State Treasurer with the competitive sale of $101 million in Lease Revenue Bonds, 2018 Series C for the State Public Works Board ("SPWB") of the State of California ("2018 Series C LRBs").
The bonds financed various correctional facilities. The SPWB benefited from a stable tone in the municipal market, with the benchmark "AAA" MMD index reading no movement leading into the time when bids were due. Despite a heavy national supply calendar, the SPWB received strong investor demand and attracted a total of 15 bids from the underwriting community. Due to the high number of bids, the SPWB was able to secure a very low true interest cost ("TIC") for the borrowing.
The 15-year term (final maturity date 2033) and size of the transaction helped attract bids from large national firms as well as regional underwriting desks. Wells Fargo Securities submitted the winning TIC bid of 2.881738%, with Citi submitting a very close cover bid of 2.89022%, less than one (1) basis point above the winning bid. Most of the other bids were clustered within a six (6) basis point range between 2.90-2.96%. KNN estimates that the SPWB saved approximately $1.4 million in interest cost between the low and high TIC bids. Please see the graph below for additional competitive sale bidder details:
Proceeds of the sale will provide nearly $101 million of funding for four (4) correctional facilities across the State. The high volume of bids received by SPWB highlights the strong and competitive demand for high-quality California tax-exempt bonds. The transaction successfully closed on Tuesday, October 16th.
Should you have any questions regarding this transaction, please contact David Leifer or Bobby Cheung, who served as the lead financial advisors on the sale.
Senior Managing Director