BRADENTON, Fla. — Favorable market conditions and investor interest led Fort Lauderdale, Fla., to price $338 million of taxable pension obligation bonds on Wednesday, a day earlier than originally planned.
The city received $642 million in orders for the deal, and many maturities were oversubscribed.
As a result, Fort Lauderdale received a benefit during the early pricing with the yield on some maturities lowered by 5 basis points to 10 basis points from rates being sought during the pre-marketing period, according to city manager Lee Feldman.
The deal achieved an all-in true interest cost of 4.168%. The city's maximum limit on the TIC going into the deal was 4.5%.
"The numbers work for us," Feldman said.
Though the transaction was set to price on Thursday, Feldman said conditions and investor interest came together a day early.
"We saw a rally in the Treasuries that we thought was favorable to us. We decided that to avoid market risk that we would go early," he said Thursday morning. "We were getting investor interest on the calls that the underwriters making and just decided to go into the market [Wednesday] versus worrying what would happen overnight."
The final structure of the deal sold as $258.24 million of serial bonds maturing between 2013 and 2027, and $79.5 million of term bonds with final maturity in 2032.
The serial bonds priced with yields ranging from 0.57% in 2013, to 3.024% in 2020, to 4.57% in 2027. The final term bond priced to yield 5.14% in 2032.
Citi was book-runner for a syndicate that also consisted of Bank of America Merrill Lynch, JPMorgan, and Morgan Stanley.
Bond proceeds are being used to discharge $300 million, or 75%, of the city's unfunded actuarially required liability over the next 20 years for its two pension plans - the general employees' plan and the police/fire plan.
Had the city continued to pay the unfunded liability annually, it would have been required to pay between 7.5% to 7.75% in interest.
The interest cost on the pension obligation bond sale resulted in net present value savings of $82.4 million, or 25.7%, over the life of the bonds, according to pricing details.
The city also plans to use $16.1 million of bond proceeds to repay a loan last year that pre-funded a portion of the police/fire plan's annually required contribution, or ARC.
The special obligation bonds are rated A1 by Moody's Investors Service and AA-minus by Standard & Poor's. Both agencies placed stable outlooks on the bonds.