A $2.4 billion deal from a newly created Connecticut issuer drew robust investor interest, surpassing market participants' expectations.
The deal, issued by the public Aquarion Water Authority to finance its purchase of a water company from for-profit utility Eversource, "exceeded anybody's wildest dreams in terms of that deal did incredibly well in the market," said Jamie Iselin, head of the municipal fixed income team and a senior portfolio manager at Neuberger Berman.
The authority came to market Tuesday with $2.353 billion of water revenue bonds, consisting of $1.789 billion of senior bonds and $563.75 million of subordinate debt. BAM Mutual insured $305 million of the deal.
BofA was the underwriter on the deal. Moody's assigned an A1 rating to the senior revenue bonds and an A2 rating to the subordinate revenue bonds. S&P Global Ratings assigned an A-minus rating to the issuer's senior debt and a BBB-plus rating to its subordinate debt. Both S&P and Moody's assigned Aquarion a stable outlook.
The 2026 bonds priced days after Eversource officially closed on its $2.4 billion sale of the Aquarion Water Co. to the South Central Connecticut Regional Water Authority, or RWA, leading to the creation of the Aquarion Water Authority.
To acquire the water company, Aquarion drew on a BofA-led bridge loan and will use the proceeds from the mega deal to repay it.
The issuer priced the bonds very defensively at first, and despite the deal being over $2 billion, there was an incredible amount of demand and oversubscription, said Kevin McGuigan, director at Municipal Market Analytics.
The deal — reportedly the largest in Connecticut on record — saw an order book almost 30 times the size of the transaction, "lending support to a new issuer in a specialty state with limited spread product," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.
The deal included "current and zero-coupon bonds with sizable concessions to standard state- or local-level credits — A1/A-rated short and intermediate terms were spread above +50/AAA spots, and maturities past 2036 included coveted 5¼% coupons," she said.
While it was a new credit, the deal "was backed by a team with deep municipal market expertise, at the authority staff, municipal advisor, and underwriting levels," said Kevin Roberts, managing vice president in BAM's public finance group. "That paid off in terms of really getting the right information into the hands of credit analysts and investors at the right time, so we could make informed decisions to commit to the deal."
BAM worked with the deal team to find opportunities to use a BAM insurance policy instead of "a cash deposit to the debt-service reserve fund for both the senior and the junior bonds: That drove savings by reducing the authority's overall financing need," he said.
The transaction checked off many boxes for investors, including being an essential service revenue-backed bond, the transaction size, the maturity structure and both senior and subordinate bond offerings.
For Appleton, the firm participated in the deal for several reasons: Aquarion is an essential service provider to a large region in Connecticut, these assets were purchased from a for-profit provider, the issuer is out from under regulatory restraint from a rate standpoint as a public agency, and it has a little bit more flexibility to invest capital back into these communities, said Nate Harris, director of municipal research at Appleton Partners.
"We thought that was certainly a compelling story, and it could support the credit," he said.
The deal also hailed from a specialty state where many things trade on the richer side, Harris said.
Additional investors don't often have exposure to Connecticut essential services bonds or water bonds, so the deal was a good opportunity for long-term exposure to Connecticut essential services, McGuigan said.
The Aquarion deal caught people's eyes over two other mega deals this week: The New York State Thruway Authority's $2.444 billion state personal income tax revenue bonds, and the New Jersey Turnpike Authority's $1.06 billion turnpike revenue bonds in two deals.
Both are "great" credits, but they're very widely held. So in a market that's a little bit heavier, they're not going to "fly off the shelf" as Aquarion did, Iselin said.
The Aquarion Water Authority will own and manage a broad water supply and distribution network. The system provides services to consumers across 59 of Connecticut's 169 municipalities and manages wastewater services for residents in Ansonia and New Hartford, according to the preliminary official statement.
"Customers should continue to expect the same reliable service they receive today," Lucy Teixeira, president of Aquarion Water Authority, said in a statement. "The people who operate this system every day remain focused on delivering safe, high-quality water, maintaining critical infrastructure, and providing responsive service to the communities we serve. Our commitment to customers remains unchanged."
The authority was created under an act in 2024 during a special session of Connecticut's state legislature, which allowed the South Central Connecticut Regional Water Authority to bid on Aquarion Water Co.
In January 2025, the RWA entered into a $2.4 billion agreement to acquire the water company from Eversource. The sale drew opposition from some elected officials, consumer advocates and others, leading to Eversource and RWA officials promising not to hike rates for at least six months after the transaction.
Connecticut's Public Utilities Regulatory Authority initially rejected the sale toward the end of 2025, leading Eversource and RWA to appeal. Following a Superior Court judge's overturning of the rejection in January 2026, PURA granted approval in March.
Following PURA's approval, Connecticut Attorney General William Tong said in a statement, "Literally no one wanted this deal except for the utility executives looking to cash out. The economics of this deal made zero sense. It's a costly loser wrapped in a bunch of fuzzy math and empty promises. PURA had every ounce of authority and every reason to reject this deal, but they simply caved."
The $2.4 billion acquisition closed on June 30, establishing Aquarion Water Authority as a not-for-profit, locally governed utility.
Aquarion becomes the largest water system in the state, serving 20% of Connecticut's population, said Michael Werz, a Moody's analyst.
It will have a very large and reliable customer base, a factor Moody's cited as a reason for its A1 rating, he said.
The rating also reflects the water system's strong water supply availability, Werz said.
The issuer, though, may face challenges from raising rates, as customers are accustomed to minimal changes, making it difficult to raise them, Moody's said in a report.
An application forecasted annual rate increases between 6.5% and 8.35% annually through the next decade, with further rate hikes expected every five years after, according to
Those plans could double water bills for residents over the next decade, the release said.
S&P views the rate changes as affordable, with the average residential water bill accounting for 0.8% of income.
"We view positively the willingness of the representative policy board to apolitically approve raising rates when necessary, compared to existing limitations from PURA, and that AWA intends to regularly update its 10-year financial model with these assumptions," the rating agency said.
The municipalization of the utility came after PURA rejected a rate increase request from the private utility in 2023, Tong said. As a public utility, it is no longer under PURA's jurisdiction.
Aquarion also has to contend with a below-sector-median days-of-cash-on-hand level over the next several years and large capital needs, the Moody's report said.
The latter includes replacing 150 miles of pipelines that are, on average, 60 years old by 2030, and around $113 million in treatment plant modernization needs, Moody's strategists noted in a report.
Despite some of the challenges Aquarion faces, it has effective management, as shown by compliance with operating permits and system maintenance, along with the maintenance of its general fiscal stability, Werz said.
"Though a new organization, management, governance, personnel and systems are not new," he said. [Aquarion] will establish themselves using a tried-and-true municipal utility organizational structure with all the benefits associated with that. Once they're beyond the transition risk period, they're not going to look atypical compared to any other water and sewer utility system."
