Jefferson County, Alabama, received more than $800 million in orders during Wednesday’s pricing of general obligation refunding warrants, resulting in demand that helped the county achieve greater savings than anticipated.

Initially, the $112.5 million of Series A GO warrants priced with a true interest cost of 2.60% and the $26.9 million of Series B delayed-delivery GOs priced with a TIC of 2.49%.

Jefferson County, Alabama, County County Commission President Jimmie Stephens.
Jefferson County Commission President Jimmie Stephens said recent debt issues helped the county achieve “significant financial improvement.”

“The strong demand allowed the county to lower the true interest cost on the combined 2018 warrants to a 2.59%,” said County Commission President Jimmie Stephens.

The combined present value savings was $12.35 million, which will be used to lower debt-service costs within existing maturities of the refunded warrants.

Before the deal priced, Stephens had said that the county’s finance team estimated the combined present value savings would be in the range of $10 million to $11 million.

“Overall, the county received $809 million in orders for the warrants from many different types of investors, including retail investors, separately managed accounts, institutional money managers, bond funds, insurance companies and hedge funds,” Stephens said.

The Series A warrants priced to yield 1.9% with a 4% coupon in 2019, 2.4% with a 5% coupon in 2023, and 2.86% with a 5% coupon in 2026.

The Series B warrants, to be delivered around Sept. 17, priced to yield 2.1% with a 4% coupon in 2019, 2.26% with a 5% coupon in 2020, and 2.41% with a 5% coupon in 2021.

Warrant proceeds refunded certain GOs issued in 2003, 2004, and 2013 as well as lease payments under a 2006 agreement with the Jefferson County Public Building Authority.

Fitch Ratings assigned its AA-minus rating to the warrants, an upgrade from A, while S&P Global Ratings gave the warrants its AA-minus rating and Moody's Investors Service assigned an A3 rating. All had stable outlooks.

The deal was the second issuance by Jefferson County since emerging from bankruptcy Dec. 3, 2013. The bankruptcy and a related appeal are disclosed in the preliminary official statement.

The county first returned to the bond market last year to refund $339 million of education revenue warrants backed by a new 1% local sales tax. After paying debt service, excess sales tax revenues are providing the county a cash infusion for transportation projects, bridge construction and economic development efforts.

The 2017 deal was also oversubscribed with more than $1.7 billion of orders. It sold with a TIC of 3.38%. The county had anticipated a TIC of around 3.6%.

Stephens said the 2017 and 2018 debt issues “represent a significant financial improvement and an important step towards achieving the County Commission’s goals for Jefferson County.”

Raymond James is the book-runner for this week's pricing, and a lead manager along with Stifel, Nicolaus & Co.

Co-managers are Citi, Drexel Hamilton LLC, Piper Jaffray and Securities Capital Corp.

Public Resources Advisory Group and Terminus Municipal Advisors LLC are co-financial advisors to the county.

Balch & Bingham LLP is bond counsel. Bradley Arant Boult Cummings LLP is disclosure counsel. Waldrep, Stewart & Kendrick LLC is underwriters’ counsel.

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