LOS ANGELES - The City and County of Honolulu plan to price a combined $689 million new money and refunding deal on July 21-22 to finance improvements to wastewater facilities.
The sale, authorized by the City Council, will include as much as $200 million in new money. More than $400 million will go to refinance existing wastewater bonds for interest rate savings.
Bank of America Merrill Lynch is the lead underwriter and Piper Jaffray & Co. is co-manager. Orrick, Herrington & Sutcliffe is bond counsel.
Moody's Investors Service and Fitch Ratings rated the city's wastewater revenue senior bonds Aa2/AA, and the junior bonds Aa3/AA-minus, respectively. Both gave stable outlooks.
"The Aa2 senior lien and Aa3 junior lien ratings are based primarily on the sizable economic base served by the wastewater enterprise and a trend of healthy debt service coverage and liquidity," Moody's analysts wrote in the July 8 report. "The rating also incorporates strong management practices including comprehensive fiscal policies, regular rate adjustments and long term planning, and continuing progress on the system's sizable capital improvement plan to address environmental risks which will require substantial borrowing in the coming years."
The bonds are helping to fund $5.9 million in capital improvements through fiscal year 2030.
The department has delivered $1.9 billion in projects since 2001 on time and on budget, said Tim Houghton, deputy director of the Department of Environmental Services, City and County of Honolulu, in an online road show.
The proceeds will fund work on wastewater pump stations, pipes and facilities in Ala Moana, Chinatown, Kailua, Kalihi, Kaneohe, Manoa, Nuuanu, Palolo, Sand Island, Honouliuli, Wahiawa, Waimalu and other neighborhoods.
The capital improvement projects and upgrades in the city's long-term plan came about as part of a consent decree in 2010 between the federal Environmental Protection Agency, the state Department of Health and several non-profit environmental groups as to how the city would meet evolving discharge standards regarding wastewater treatment.
The rate strategy was designed to generate sufficient revenues to ensure compliance, Houghton said. The system doesn't rely on the city and county's general taxes and other revenues. The system has implemented rate increases on a multi-year system as needed to support the improvements, he said.
The bonds will be priced in five series with a retail order period slated for July 21 and an institutional period following July 22. The sale is structured with three senior lien and two junior lien series. The senior lien bonds include the $176 million 2015A new money tax exempt revenue bonds with a maturity range of 2017-2045; the $273.9 million 2015B tax exempt refunding with maturities of 2017 to 2036; and the $99.9 million 2015C series taxable refunding bonds with maturities of 2016-2045. The junior lien bonds include the $114.5 million 2015A tax-exempt refunding bonds and $24.5 million Series 2015B taxable refunding bonds.
The wastewater bonds will pay semi-annual interest and will be sold in denominations of $5,000, or multiples thereof. The bonds will be exempt from Hawaii and federal income taxes, Senior Series 2015A and B and Junior Series 2015A. Senior Series 2015C and Junior Series 2015B are subject to federal taxes but exempt from Hawaii taxes.
The bonds will not have debt service reserve funds.