DALLAS — In a deal that was accelerated to take advantage of current market conditions, the Arizona Water Infrastructure Finance Authority saw its $345 million of refunding bonds oversubscribed up to five times in a negotiated deal Oct. 30.
Net present value savings of $22 million or 6.3% were even better than expected for the top-rated bonds, said Piper Jaffray managing director Bill Davis, financial advisor to the authority.
"WIFA's bonds were very well received," Davis said. "They were oversubscribed four to five times in a couple of maturities. They started with some pretty aggressive spreads against the MMD and they were able to tighten those. There was good tone in the market."
Davis said the deal was originally planned for the first or second week of November but was moved up when the ratings came in earlier than expected. The pre-Halloween sale allowed WIFA to get ahead of an expected year-end rush to market.
Bonds maturing in 2029 with 5% coupons drew yields of 2.56%. Proceeds refunded portions of issues from 2006, 2008, 2009 and 2010.
WIFA lends proceeds of its bonds to local utilities, which form a pool of rated borrowers. Loan repayments from the utilities are due no less than 90 days before debt service payments, and there are corrective action policies in place for delinquent loans. Bonds are designated as state-match or leveraged bonds and then further allocated between the clean water and drinking water revolving funds.
Lake Havasu is the largest borrower in the state, representing about 20% of the loan portfolio.
The bonds carried triple-A ratings from Standard & Poor's and Fitch Ratings with stable outlooks.
"Debt service coverage from all sources is sufficient to meet our default tolerance for 'AAA' rated municipal pools," S&Ps primary analyst Scott Garrigan noted. "Including just loan revenues and interest earnings, annual DSC is no less than 1.3x for all years of debt service."
