CHICAGO - The Cleveland Water Department is set to come to market tomorrow with $140 million of water revenue bonds, a deal that will be followed next month with a second sale as part of the city's long-term capital improvement plan.
While the sale will include mostly fixed-rate bonds, there will also be a small current refunding, according to Timm Offtermatt of A.G. Edwards & Sons Inc., the lead manager on the deal. NatCity Investments, Inc., SBK-Brooks Investment Corp., and Siebert Brandford Shank & Co. are co-managers on the deal.
The sale will include some term bonds that will mature in 2033, as well as serials that go to 2021, Offtermatt said. The weighted average maturity is less then 15 years, he added
"We're taking advantage of what are still low long-term rates, particularly at the shorter end of the yield curve," he said.
The Cleveland officials expect that the bonds would carry triple-A insurance from Financial Guaranty Insurance Co. Both Moody's Investors Service and Standard & Poor's assigned underlying double-A minus ratings to the deal.
The city's $900 million capital improvement plan started in 1981. The program, which is planned for completion in 2008, uses bond proceeds in the Cleveland Enterprise Fund to make upgrades to the aging system.
"The lion's share of the transaction is to fund improvements in the plants," Offtermatt said. The city has four primary production facilities. Bond proceeds have paid for about 80% of Cleveland's long-term capital improvements to the water-treatment facilities.
The city will return to the market in late November to sell $90 million of variable-rate demand bonds, according to Offtermatt.
He said that although the recent oversupply in the bond market was of some concern, he did not anticipate a delay in the sale, which will be open to retail buyers today and institutional buyers tomorrow.
Cleveland sold $93 million of refunding bonds in 2001.
Squire, Sanders & Dempsey and Forbes, Fields & Associates are co-bond counsel for the issue.
