KeyBanc Capital Markets will price for the Ohio Water Development Authority $160.1 million of water development revenue and revenue refunding bonds on Tuesday, marking the authority's fifth issue under a fresh water revolving fund subordinate indenture structure.
The deal brings highly-rated paper to the market while providing lower-cost financing to local water and sewer agencies.
The fixed-rate Series 2026B bonds are rated triple-A by Moody's Ratings and S&P Global Ratings. Both rating agencies assign a stable outlook. S&P concurrently affirmed its A-1 short-term rating on OWDA's fresh water commercial paper program.
The bonds are callable June 1, 2036. They will fund loans to local government agencies through the authority's fresh water revolving fund program to pay for building or acquiring wastewater treatment, sewer, sewage collection and water supply and distribution facilities.
They will also refund the authority's outstanding fresh water Series 2016B water development revenue bonds and pay costs of issuance.
The municipal advisor on the deal is Hilltop Securities. Bond counsel is Squire Patton Boggs.
The authority's fresh water bonds are senior to the fresh water revolving fund bonds. The Series 2026B bonds will be issued under the fresh water revolving fund subordinate indenture structure created in August 2024.
OWDA CFO and Assistant Executive Director Todd Skruck said all new money and refunding issues since August 2024 have occurred under the fresh water revolving fund subordinate indenture.
"The senior fresh water indenture is closed off to new issuance," he said by email. "The authority made that covenant to ensure the integrity and senior status of the senior fresh water bonds."
The Series 2026B bonds are the fifth series of bonds issued under that subordinate indenture structure, according to an online investor presentation. They are issued on a parity with the previously issued fresh water revolving fund bonds, certain subordinate obligations issued under the senior fresh water trust agreement, and any future series of fresh water revolving fund bonds.
The fresh water revolving fund bonds are secured on a subordinate basis to the fresh water bonds by the payments the authority receives from outstanding fresh water loans.
The fresh water program offers market-rate loans with rate reductions based on the circumstances of the local government agency. The fresh water fund includes a diverse loan pool that "provides significant overcollateralization for bondholders," according to the presentation.
About $3.08 billion in principal amount of loans awarded that remain outstanding have been made through the authority's fresh water programs, with a current principal balance of $2.22 billion outstanding.
Columbus and Licking Regional Water District are the two largest borrowers, with 17.23% and 7.85% of total projected remaining loan balance, respectively.
The revenues pledged to the fresh water revolving fund bonds include the net revenues from local government agencies' cooperative agreements within the fresh water trust agreement and fresh water revolving fund trust agreement, minus required deposits to the debt service fund or the debt service reserve fund under the senior fresh water trust agreement, per the presentation.
Excess loan repayments flowing to the fresh water revolving fund trust agreement structure provide an average 1.28x semi-annual debt service coverage over the next 20 years.
Two cybersecurity incidents are among the disclosures listed in the
There was "an unauthorized submission of inaccurate bank information for a construction contractor related to draws on certain loans," according to the POS, and the authority is now "in the process of implementing additional safeguards," including adding two-factor authentication for the loan processing system and relying on a third-party service for account ownership validation.
Skruck said the incidents occurred in 2023 and involved two local governments receiving fraudulent payment instructions from their project contractors, whose emails had been compromised.
"The fraudulent payment information was submitted to the local government and forwarded to OWDA, which resulted in two disbursements made to fraudulent entities," he said. "One of those payments was recovered. OWDA has implemented additional controls after a detailed audit of our operations by an IT security firm."
No OWDA email accounts or computer systems were compromised in the incidents, Skruck said.
