PHOENIX - The San Francisco Bay Area Rapid Transit district will get in on the rush to advance refund before the tax reform deadline with a $188 million deal.

The transaction, set to price by negotiation Dec. 14, was originally planned for early next year but was moved up and hurried to market so it could close before Jan. 1, 2018. Advance refunding bonds issued after Dec. 31 would lose their tax-exempt status under a provision included in the House-passed tax reform bill percolating on Capitol Hill, and issuers are rushing those deals to market in a trend that may result in one of the largest volume issuance months in several years.

BART's advance refunding deal is hurtling toward a close just in time to avoid legislative uncertainty.
BART's advance refunding deal is hurtling toward a close just in time to avoid legislative uncertainty. Rich Saskal

Rose Poblete, BART’s controller/treasurer, said that members of the deal team met a few days before the House tax reform bill was introduced and began planning the issuance for early in 2018. When it became clear that advance refunding bonds might be taxable by then, she said, they altered course.

“We decided to speed it up,” Poblete said. “We wanted to take advantage of it.”

Poblete said the fact that the deal team already had some initial work done was key to getting the bonds to market on time. As it is, the transaction is scheduled to close Dec. 28.

Barclays is the lead manager on the deal with Goldman Sachs as a co-senior manager, and Fidelity Capital Markets and J.P. Morgan are also underwriters. Sperry Capital is the municipal advisor on the transaction, with Orrick Herrington & Sutcliffe as bond counsel. The bonds, which carry a third-party green certification, will be sold in two series. One will be a $120.7 million tax-exempt series, with the remaining approximately $67.3 million being federally taxable. The securities carry ratings of AA-plus from both S&P Global Ratings and Fitch Ratings.

The bonds will advance refund all of BART’s outstanding 2010 series bonds, as well as a portion of the transit agency’s 2012 debt. The deal is expected to net a savings of around $20 million, Poblete said. The bonds are backed by sales tax revenue, and BART currently has some $571 million of sales tax revenue bonds outstanding. The series 2010 bonds to be refunded account for about $115 million of that figure.

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