WASHINGTON – The District of Columbia’s recent institutional investor conference is likely to lead to increased demand for bonds it plans to issue later this year, the city’s chief financial officer said.
Because of the conference, the District’s first for institutional investors, “I think we’ll have more people interested in buying from us,” D.C. CFO Jeffrey DeWitt told The Bond Buyer on Wednesday. The more people that understand the District’s credit, the more likely people will bid on their bonds, he added.
The District expects to sell $400 million of short-term tax revenue anticipation notes next month and at least $500 million of general obligation bonds toward the end of the calendar year, according to D.C. finance officials. The sales will come after an investor conference held on Sept. 24 and 25 that “far exceeded our expectations, DeWitt said.
The conference “helps us market our bonds better because … those investors now know the details of the credit,” DeWitt said. The conference also allowed D.C. to let investors know about its investor website that includes regularly updated data, he added.
The TRANs are expected to be issued for cash flow needs. About $500 million of GO bonds are expected to be issued to fund the last phase of the District’s fiscal 2015 capital improvement plan, and there could also be refunding bonds issued. The notes will be sold on a competitive basis and the bonds will be offered in a competitive sale, said Darryl Street, senior financial policy advisor in the CFO’s office.
“When you’re pricing the deal, you price it based upon the demand and you go out and see what the market will pay for it,” DeWitt said. He hopes that in the long run, investors’ knowledge that they can talk to District finance officials directly will be beneficial.
The District’s GO bonds are rated Aa1 by Moody’s Investors Service and AA from Standard and Poor’s and Fitch Ratings.
D.C. hosted the conference along with the District of Columbia Water and Sewer Authority, the Metropolitan Washington Airports Authority and the Washington Metropolitan Area Transit Authority.
The District decided to hold the conference to educate investors about its unique characteristics, DeWitt said.
When DeWitt became CFO last year, he included an investor outreach initiative in his strategic plan. Because of the contraction of the bond insurance industry due to the financial crisis, issuers now need to have relationships with investors in addition to relationships with rating agencies, he said.
“One of the first things I noticed coming here is [that] this is a complicated credit here,” Dewitt said.
“Investors don’t understand that we’re a city, state, county and school district,” plus the District has federal oversight, an independent CFO and can’t declare bankruptcy, he added. But once investors learn more about the District, “they realize this credit’s a lot more protected than the regular credit of its grade is,” he said.
“I think people are even more comfortable with the credit as a result of us being able to tell this story,” DeWitt said.
D.C. had expected about 100 to 150 people to attend the conference, but there were closer to 200 attendees, said Street. About 40 were institutional investors, and the rest included investment bankers that cover the District, financial advisors, rating agency and bond insurance officials and officials from other issuers. Attendees came from as far away as California, he added.
Investors liked that they could come to one place, see four large issuers and receive a lot of information, Street said.
U.S. Transportation Secretary Anthony Foxx was the conference’s keynote speaker and officials from D.C. and the authorities gave presentations and site tours.
D.C. plans to hold another investor conference in the future, though the frequency of how often it will hold this type of meeting has not yet been determined. It would make sense to hold conferences every other year, though if there’s a significant change in the credit, the District may hold conferences annually, DeWitt said. If conferences are held every other year, D.C. may meet with investors at their sites in the off years, he added.
