Atlanta touts outcome of city's first social bond deal

Atlanta's first foray into ESG bonds was a resounding success, according to local officials whoannounced the city's inaugural issuance of social bonds was welcomed by investors, bringing in over $369 million in funding for capital projects city-wide.

"This bond sale shows that the city of Atlanta is able to attract strong investor demand," said Atlanta's chief financial officer, Mohamed Balla, in a statement in a statement on Nov. 22 announcing the sale, which closed in early November. "Additionally, we were able to tap into the growing investor demand for social and sustainable investments, while providing an attractive cost of capital for these vital capital projects." 

Officials said the city received more than $1.2 billion of priority orders from 54 different institutional investors for the social bonds, allowing for a yield reduction on the new credit by three to five points in 2023 through 2029 maturities, and two to four points in 2030 through 2037, with the resulting rates falling in between 3.17% in 2023 to 4.38% in 2042.

Bloomberg News

In addition to the $369.4 million Series 2022A-1 social bond component, the deal also consisted of a $36.6 million Series 2022A-2 and a $3.7 million Series 2022B.

Moody's Investors Service affirmed the city at Aa1 ahead of the deal in line with Atlanta's outstanding unlimited tax GO bonds, stating in a report that the rating "reflects the city's dynamic and growing economy, whose diversity and scale will help promote resiliency in the event of a prolonged national economic slowdown." Fitch Ratings rates the bonds AA-plus rating with stable outlook.

JPMorgan and Siebert Williams Shank & Co. were joint senior managers, according to the statement from the city.

Along with approving the social bond sale via a ballot measure in May, Atlanta voters also gave the green light to two additional funding questions, allocating in total $750 million to capital projects associated with the Moving Atlanta Forward Infrastructure Program.

The program's master planfunds widespread renovations to front-facing public infrastructure across the city.

$460 million of the funds will got to transportation infrastructure, including the improvement of sidewalks, streets, trails, and bus shelters.

$161 million will go towards the rehabilitation of public parks and art centers and $92.4 to public safety improvements.

The remaining $36 million will provide each district in the city with $3 million in flexible funding for "neighborhood projects that are not already covered by the larger citywide investments in the package."

The renewed social spending in Atlanta follows large cuts to capital investment during the COVID-19 pandemic, when the municipalities and the state as a whole "turned more towards spending cuts when it hit the downturn," said Fitch analyst Eric Kim.

"In the downturn that came as a result of the pandemic, one of the first things they did was pull back, and they do sometimes take a little bit of time to restore those cuts," said Kim. "As the revenues have recovered, they've restored a lot."