BRADENTON, Fla. — Louisville issuers plan to market several bond deals this month and next that will offer investors options for picking up high-grade Kentucky paper.
The Louisville and Jefferson County Metropolitan Sewer District kicks off the slate with Tuesday’s double-A rated $257.1 million competitive revenue bonds deal.
Proceeds will fund projects in MSD’s capital plan as the district moves into the third and larger phase of its consent decree, which includes the construction of stormwater basins around the county.
The transaction is structured as $175 million of new, 30-year tax-exempt sewer revenue bonds and $82.1 of tax-exempt refunding bonds with maturities between 2016 and 2038.
While both series will mature serially as part of the district’s ongoing plan to maintain level debt service, the new money portion will offer larger blocks between $18 million and $41.7 million in the final three maturities, said MSD chief financial officer Chad Collier.
The refunding will finance early defeasance of the 2006A bonds. Current market conditions indicate that offering will bring net present value savings of around 11%, Collier said.
“It looks like bond market rates on long end are dropping again,” he said. “We might hit the sweet spot.”
The bonds are rated Aa3 by Moody's Investors Service and AA by Standard & Poor's.
S&P revised its outlook on MSD’s senior-lien debt to positive from stable based on projections of debt service coverage no less than 1.7 times for all debt, including subordinate obligations, and liquidity equivalent to $63 million days' cash on hand.
Moody’s revised its outlook to stable from positive citing the district's increased debt-funded capital spending in the next few years. It also incorporates MSD’s customer base, stable near-term financial profile, and the expectation that rates will be adjusted as needed.
On Nov. 2, Louisville Metro Sewer District will issue $226.34 million in one year bond anticipation notes. MSD has used one-year BANs for many years as a low-cost financing strategy.
The notes are rated MIG-1 by Moody’s and SP-1-plus by S&P.
“There’s huge demand out there from investors for short term, tax-exempt paper, and not a lot of supply,” Collier said. “It’s been pricing well.”
Last year, the notes sold at a true-interest cost of 28 basis points.
On Nov. 10, the Louisville-Jefferson County Metropolitan Government will be in the market to issue $55.16 million of tax-exempt general obligation bonds and $12.3 million of taxable GOs.
Ratings for the deal have not been released.
Metro’s GOs are currently rated AAA by Fitch Ratings, Aa1 by Moody’s, and AA-plus by S&P.
J.J.B. Hilliard, W.L. Lyons LLC is the financial advisor for MSD and the Metro Government. Dinsmore & Shohl LLP is bond counsel for MSD.
