Los Angeles Department of Water And Power Offering $277 Million

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The Los Angeles Department of Water and Power heads to market Wednesday to refund $276.8 million of water bonds.

The agency is currently holding public hearings on planned rate increases for both water and power services to pay infrastructure costs to meet environmental mandates.

The bonds, are expected to achieve $38 million in present-value savings, said Mario Ignacio, LADWP’s assistant chief financial officer and treasurer.

The Series A bonds will be special obligations of the department payable only from the water revenue fund.

Mostly institutional pricing is expected, since the bonds will be long-dated over a 20 to 30-year-old period, Ignacio said.

RBC Capital Markets and Siebert Brandford Shank & Co. are the lead underwriters.

Other underwriters involved in the deal included Bank of America Merrill Lynch, Barclays Capital, Cabrera Capital Markets LLC, Ramirez & Co. and US Bancorp.

The bonds were rated Aa2 by Moody’s Investors Service and AA by both Standard & Poor’s and Fitch Ratings.

Moody’s issued its rating on the water bonds last Friday, saying the rating “reflected the system’s adequate current and projected coverage levels despite some weakening in fiscal 2011 and adequate cash position.

The report also took into account the city of Los Angeles’ weakened but recovering financial position.

The department had $3.06 billion of outstanding debt on parity with the Series A bonds payable from the Water Revenue Fund, according to the preliminary official statement.

In addition to outstanding revenue bonds, the California Department of Water Resources has loaned $174.6 million to LADWP.

A portion of the proceeds will be used to refund all or a portion of the department’s outstanding water system revenue bonds, Series 2003A, which are currently outstanding in the aggregate principal amount of $300 million.

The department’s near-term plans are to issue $322 million of new money and do an advance refunding of $100 million in water bonds in July or August, according to Ignacio.

The timing and amount for the power side have not been determined, he said.

“We conducted over 30 public outreach meetings last summer and another 15-plus over the past six weeks,” Ignacio said. “We plan on continuing outreach through June, with the rate requests going to our board in mid-summer.”

LADWP hired Philip Leiber to be chief financial officer on Feb. 1.

Before joining LADWP, Leiber was the chief financial officer for Seattle City Light, a role he held from 2009 through 2012, according to LADWP officials.

Before that, he was the CFO and treasurer for the California Independent System Operator, where he was employed from 1997 to 2009.

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