CHICAGO - Springfield, Ill., last Tuesday sold all of its $22 million new-money water revenue issue to retail buyers, enabling the city to cancel its planned institutional pricing set for the next day.
City finance officials expected strong retail interest based on recent market trends and information from their underwriters, but all were surprised at the appetite - not just for the smaller serial maturities, but also for a $6 million term bond that was oversubscribed.
The mid-double A level credit was structured with serials through 2028 and a $6 million term bond in 2032. "We didn't expect that," said finance director Craig Burns of the strong interest in the term bond.
Most tranches were over-subscribed although two maturities did not attract orders and were purchased by the underwriters. Merrill Lynch & Co. served as the senior manager and Wachovia NA was a co-manager.
The deal's strong ratings and its purpose for an essential service drove the strong demand, market participants said. The shorter maturities priced with a yield of 2.92% and the term bond with a yield of 5.68% for a true interest cost of 5.325%.
"I would have liked lower rates, but am happy to have just gotten the deal done," Burns said.
Springfield had hoped to also refund about $8.5 million from a 1997 issue, but the savings likely would have not met a City Council mandated present-value savings threshold of 250,000. When the city began planning the deal after Labor Day, market rates would have produced about $500,000 in savings.
The city's water, light, and power utility needed the new-money proceeds to begin financing projects under a major infrastructure upgrade program. Springfield plans to issue another $50 million for the program in 2010.