LOS ANGELES — Competitive bidding helped the Idaho Bond Bank Authority save on one of its largest deals, said an advisor on the transaction.
Chicago-based Hutchinson Shockey Erley & Company was the winning bidder in the $51.6 million pricing held Feb. 12.
The sale attracted a record 12 bids and resulted in the cities achieving a true interest cost of 3.47%, according to Cameron Arial of Zions Bank Public Finance, who serves as financial advisor to the cities of Jerome and Twin Falls, the two participants in this bond bank issue.
"We usually average between six and 10 bidders, so 12 is clearly the most we have ever seen," Arial said.
Idaho Bond Bank Authority financial advisor Western Financial Group, LLC, and bond counsel Skinner Fawcett also worked on the deal. The cities retained Moore Smith Buxton & Turcke, Chartered as bond counsel.
Arial attributed the high level of interest to the dearth of new issues in the market, the strength of the Idaho name and the fact that large Idaho bonds are a rarity.
It was the bond bank's largest ever competitive deal.
"When you look at the list of bidders, we had most of the nationals looking at it," Arial said. "We had the square attention of the market."
The bonds fund a $13.6 million wastewater loan for Jerome as well as a $38 million wastewater loan for Twin Falls. Both municipalities will use the proceeds to fund improvements to their wastewater treatment systems.
They sold the bonds competitively, because "on a high-grade credit like this, that is pretty straight-forward, it's pretty much a no-brainer," Arial said.
He typically recommends competitive sales where possible because he likes the transparency, says it puts the incentives in the right place, and Zions likes to follow Government Finance Officers Association best practices.
They were anticipating yields in the middle of Municipal Market Data's Double A and Triple A scale in light of the deal's Aa1 rating from Moody's Investors Service,
"Give or take a few basis points, we were on top of the Triple A," Arial said.
Arial was a financial advisor on the Idaho Bond Bank's negotiated sale in November 2012 of $66.34 million in bonds -- the largest negotiated sale in the bond bank's history. Seattle-Northwest Securities Corp., now part of Piper Jaffray, acted as the underwriter on that deal.
Idaho residents approved a constitutional amendment in 2000 creating the bond bank, which enables municipalities to pool smaller bond issues into a single, large issue and secure more favorable rates and terms than they could achieve individually. The bonds are backed by Idaho's sales tax revenues.
