DALLAS - Squeezing a planned two-day pricing into one day because of an approaching snowstorm in the Northeast, the Utah Transit Authority captured record savings on an $860.6 million refunding Jan. 26.
Net present value savings of $77.7 million or 8.8% were better than expected, according to Robert Biles, UTA chief financial officer.
"New York City weather and early market feedback encouraged us to move quickly to complete the sale on Monday," Biles told The Bond Buyer.
Financial advisor Brian Baker, vice president of Zions Bank Public Finance, called it "by far the largest UTA deal ever, and by far the most savings ever on a UTA deal."
As storm warnings left trading desks about 85% staffed on Monday and brought fears that the financial district might be paralyzed Tuesday, Biles, lead banker Charles Cook, executive director at Morgan Stanley, and Baker held conference calls with the syndicate to decide whether to delay the deal or to try for retail and institutional pricing in one day.
"Sunday night we determined that, due to the impending storm, Tuesday would not be an effective pricing day, and we would not be in the market that day," Baker said. "Monday morning, the underwriting group gained feedback from investors, including a couple of anchor orders, that gave us confidence we could price the deal on Monday," he said. "We obviously faced the risk that we may not complete the deal Monday, and would be forced to carry things over into Wednesday with a likely repricing."
The concern about Wednesday was how the Federal Reserve's Open Market Committee meeting might affect rates as UTA established the escrow account for its proceeds.
Despite the approaching storm, estimated net present value savings had increased dramatically from when the team first started preparing for the deal, Baker said.
"The preference therefore was to take risk off the table if possible by getting a deal done now, as opposed to waiting for the unknown with the FOMC and possible movements in rates due to any number of reasons," he said.
When Pennsylvania announced that it would delay its $1 billion competitive bond offering by week, UTA's deal became the largest in the market.
"Feedback from the underwriting team that investors were focused on our deal was crucial in deciding to move forward," Baker said. "The fact that Pennsylvania was postponed and several other deals that might have been in the market on Tuesday also moved off that day certainly made it easier for investors to focus on UTA's deal."
UTA's $668.7 million senior-lien bonds are rated AAA by Standard & Poor's, Aa2 by Moody's Investors Service and AA by Fitch. The $192.2 million subordinate-lien bonds are rated A-plus by Fitch Ratings and A1 by Moody's. The trading desks took in $1.45 billion of orders, leaving the bonds oversubscribed.
With an average coupon of 4.680366% and an average weighted maturity of 15.8 years, the all-in true interest cost came to 3.219180%, according to the pricing sheet.
"The final par amount of the deal was slightly higher because we received a few large orders with 4% coupons," Baker said. "As a result, there was a lower premium and thus the need to issue more par. Approximately $125 million went to retail."
