BRADENTON, Fla. – Florida’s Citizens Property Insurance Corp.’s tax-exempt bond offering Tuesday was oversubscribed 2-1/2 times after receiving $3.8 billion in orders.
The investor interest enabled the state-run insurer to upsize its transaction to $1.5 billion from $1.25 billion, while lowering its cost of borrowing compared to last year.
Book-runner JPMorgan led the sale of the bonds and notes to retail on Monday and institutional investors Tuesday. Proceeds will be used by the nonprofit insurer as liquidity to pay claims, if needed, during the hurricane season.
The deal garnered a true interest cost of 3.075%, which lowered the insurer’s borrowing expense by more than 100 basis points over last year’s $900 million offering, according to Raymond James | Morgan Keegan financial advisor John Forney.
Though market conditions have improved since last year, Citizens also saw credit spreads improve by 45 basis points “at a time when most other issuers are seeing worsening credit spreads,” he said.
“Blue chip investors came in bulk,” Forney added.
chief financial officer Sharon Binnun called the offering a “very successful transaction,” and attributed the outcome to investors who recognize the agency’s strong underlying financial structure and governance.
“A key to our success has been a sustained long-term, individualized investor outreach strategy,” Binnun said.
The final transaction sold as $1.1 billion of bonds maturing from 2015 to 2022, $200 million of one-year notes and $200 million of three-year floating rate notes.
The bonds sold with yields ranging from 1.72% with a 5% coupon in 2015, to 2.43% with a 5% coupon in 2017, to 3.77% with a 5% coupon in 2022.
The long-term bonds are rated A-plus by Fitch Ratings and Standard & Poor’s, and A2 by Moody’s Investors Service. The short-term notes are rated of F1-plus by Fitch, MIG-1 by Moody’s, and SP-1-plus by S&P.
Along with JPMorgan, senior managers on the transaction were Bank of America Merrill Lynch, Citi, Goldman, Sachs & Co., and Morgan Stanley. Co-managers were Jefferies & Co., Loop Capital Markets LLC, Ramirez & Co. and RBC Capital Markets.
