DALLAS — Heading into a market rally that has brought yields to record lows, Denver Public Schools achieved double its targeted savings with $129.9 million of refunding bonds Wednesday.
The district, which issues debt under the name Denver City and County School District No. 1, saved 6.737%, or $9.1 million, in present-value savings, officials involved in the deal said.
“We feel we did very well,” said district chief financial officer David Hart. “We achieved over two times the savings rate in our parameters.”
George K. Baum & Co. was lead manager on the deal. The district used no outside financial advisor, Hart said.
The refunding bonds earned ratings of AA-minus from Standard & Poor’s based on the Colorado School District Credit Enhancement Program that wraps the bonds. Moody’s Investors Service rates the debt a notch higher at Aa2. Both agencies assigned a stable outlook. The district’s underlying ratings are also AA-minus and Aa2.
“The stable outlook reflects the expectation that the district’s service area will recover from the recession and continue to expand at moderate levels over the long term,” Moody’s analyst Dan Steed wrote.
The analysts also affirmed long-term ratings of A-plus from Standard & Poor’s and Aa3 from Moody’s on certificates of participation issued last year.
At the district’s December board meeting, finance officers discussed the implications of S&P’s Nov. 29 downgrade of 15 U.S. banks, including three that provided letters of credit or swaps for the 2011 COPs.
“We expect that the downgrades will result in rating changes on certain of the 2011A COPs, as the short-term ratings of the 2011A COPs are based on the short-term ratings of the letter-of-credit banks that support them,” school district staff said in a report.
Hart said Wednesday that there has been no appreciable difference in the variable rates on the COPs as a result of the downgrades, with the weekly rates running at about 13 basis points. “We don’t really have a concern,” he said.
Through the 2011A and B COPs, the district converted its $750 million of Series 2008A and B variable-rate pension COPs to $400 million of Series 2011B fixed-rate pension COPs, with a $408.5 million Series 2011A in variable-rate mode with LOCs from JPMorgan Chase & Co., Wells Fargo Bank NA and RBC.