LOS ANGELES — The Honolulu Board of Water Supply priced $85.2 million of bonds Wednesday, achieving an expected net savings of $7.15 million over the life of the bonds.
BWS manager and chief engineer Ernest Lau said in a statement the refinancing is part of the board’s ongoing efforts to minimize costs and ensure fiscal stability to Oahu Water ratepayers.
The refinancing will yield a cost savings of $430,000 a year, officials said.
Bank of America Merrill Lynch was the underwriter.
The system serves a sizeable 166,844 customers and a population of about 953,000 within a 597-square-mile service area, according to a Moody’s Investors Service report.
Paul Kikuchi, the chief financial officer of the water board, said he began reviewing the agency’s outstanding bonds to determine which to do an advance refunding on as interest rates continued to drop.
The board of directors on Feb. 27 approved refunding portions of 2001, 2004, and 2006 issuances.
The current offering is secured by a senior lien on net revenues of Honolulu’s water system. Proceeds of the current offering will be used to refund a portion of the board’s previously issued revenue bonds for annual debt service savings.
The board was hoping for all-in rates of 3.25% to 3.3%, Kikuchi said. They achieved rates from 2% to 5% on the 23 maturities, according to the Municipal Securities Rulemaking Board’s EMMA site.
Michael Pietronico, chief executive of Miller Tabak Asset Management, would not comment specifically on the bonds, but said any deal this week had to have a concession attached relative to where it would have priced last week. The market has seen interest rates back up rather notably, he said.
“In March, supply tends to pick up as cash available to reinvest moves a couple notches down,” Pietronico said. “It is typically the worst month of the year — and this year is holding true to form.”
Moody’s and Fitch Ratings recently affirmed the board’s rating of Aa2 and AA-plus, respectively, maintaining a “stable outlook” in both cases.
Moody’s said its rating primarily reflects the system’s affluent service area, which includes the city and county of Honolulu, which has a Aa1 general obligation rating with a stable outlook. The agency itself has generally favorable operating results, and an ample supply of high-quality ground water that requires little treatment and enables it to avoid importing water.
Moody’s notes the 72.6% operating ratio in fiscal 2011 is average, while a 27.7% debt ratio is low, indicative of infrequent issuance.
The stable outlook reflects Moody’s expectation that system financial operations will continue to benefit from sound management practices, approved multi-year rate increases, and no additional borrowing plans.
The board has no plans to issue new money this year, because it has enough cash to pay as it goes for capital projects for renewal and replacements, Kikuchi said.
