Philadelphia achieved $742,350 in savings in refunding bonds sold for Philadelphia Gas Works last week, according to City Treasurer Rasheia Johnson.
The sale achieved net present value savings of 10% from the refunded bonds, Johnson announced Friday.
The $273.1 million deal currently refunded $7.3 million of debt. The majority of bond proceeds finance $165 million in infrastructure improvements at the nation’s largest municipally owned natural gas utility. The transaction, which was led by lead manager Morgan Stanley, will also help the city repay $101 million of outstanding short-term commercial paper notes and pay back $25 million to PGW for cash spent on capital projects.
Johnson said the bonds had an overall all-in true interest cost of 3.81% after reducing interest rates to reflect strong investor interest. She said a one-notch credit upgrade of PGW by Moody’s Investors Service to A3 from Baa1 in late July along with extensive pre-marketing efforts with investors helped the city price the bonds at tight spreads.
“Moody’s upgrade is a reflection of PGW’s strong management team that has increased PGW’s operating efficiencies and financial position in addition to the constructive relationship between PGW’s board of directors (PFMC) and the Pennsylvania Public Utility Commission (PUC),” Johnson said in a statement.
Johnson noted that the bonds received more than $1.2 billion of orders from 52 investor accounts including many of the largest U.S. bond funds. Bonds that mature in 2047 priced at a spread of 55 basis points compared to closing Municipal Market Data rates on Aug. 8, according to Johnson. She added that during pricing, the city was able to lower yields by as much as nine basis points per maturity compared to the preliminary scale.
