The West Virginia Economic Development Authority came to the offshore market on Tuesday with a tax-exempt $150 million junk-rated private activity bond issuance that will be used to finance a portion of Commercial Metals Company's steel micro mill.
"A muni deal sold solely offshore is a rare signal," said James Pruskowski, CIO and co-founder of 16Rock.
"Even for a Regulation S PAB, this structure suggests the issuer prioritized execution over transparency—likely due to soft U.S. demand or regulatory friction. It limits price discovery and raises quiet flags around compliance risk."
Regulation S refers to a Securities and Exchange Commission rule that allows issuers to offer securities outside of the U.S. without registering them with the SEC.
The designation sometimes provides a mechanism for U.S. and non-U.S. entities to raise capital for foreign companies while complying with U.S. securities laws.
According to CMC, "The bonds were sold at a price equal to 100% of the principal amount thereof. CMC intends to borrow the proceeds from the sale of the bonds from the WVEDA pursuant to a loan agreement and use such proceeds to finance a portion of the costs of the construction of solid waste disposal facilities."
The Solid Waste Disposal Facilities Revenue Bonds, Commercial Metals Company Project Series 2025 priced with a 4.625% coupon rate. The bonds are scheduled to close on May 15 and were actively traded on Wednesday, EMMA shows.
The proceeds of the bonds will finance a portion of CMC's steel micro mill currently under construction in Berkley County, West Virginia.
The company is due to receive up to $75 million of disbursements from WVEDA in the form of a forgivable loan for eligible costs incurred from June 21, 2023, through June 20, 2027, upon reaching investment and employment milestones.
Wells Fargo and Truist served as the lead manager on the deal with BofA Securities, PNC Capital Markets, Fifth Third Securities, U.S. Bancorp, and the Bank of Montreal acting as co-managers. Ballard Spahr is the bond counsel
S&P Global Ratings was the only major rating agency to score the deal giving it a BB+ and a Recovery Rating of 3.
A recovery rating of 3 indicates S&P's expectation of meaningful recovery in the event of a default is 50%-70% with a rounded estimate of 55%.
Per S&P, "The micro mill will give CMC a larger footprint serving the Northeast, Mid-Atlantic, and Mid-Western U.S. market, a region that is a net importer of rebar steel, densely populated and steel intensive. We expect the mill to be completed and start commissioning in late calendar 2025."
"CMC's end markets are facing significant uncertainty from a changing trade policy environment, weakening economic sentiment, and evolving interest outlook amid higher inflation expectations. The construction markets face headwinds as tariffs imposed could increase construction materials prices, potentially leading to cost overruns or project delays."
CMC is the second steel firm to set up an operation in the Mountain State following the lead of NuCor's $3 billion project in Apple Grove that will be biggest capital investment in West Virginia's history.
CMC's $450 million micro mill, which is designated as "MM4," is designed to produce approximately 500,000 tons of straight-length and spooled rebar each year and will employ about 230 people.
As the deal took shape local leaders weighed the prospect of new jobs against the needs for additional infrastructure improvements.
Eddie Gochenour, a designated representative for the Berkeley County Commission on the Berkley County Development Authority Board of Directors said, "Highway infrastructure is critical. Our water district is going through a major upgrade throughout the county and different sections of the county."
"Our sewer is in pretty good shape. Our schools are in need of additional space as well. We're getting pressure from lots of different places, but we got to be able to produce those jobs."
When the deal was announced in 2022, Barbara R. Smith, chairman of the board, president and CEO, said, "We are pleased to enter the next phase of this exciting investment, and to establish CMC's manufacturing presence in West Virginia."
"The planned site, located in the eastern panhandle of the state near Martinsburg, is well-situated to serve key metropolitan markets in the Mid-Atlantic and Northeast, as well as the Midwest."
Sixty locations across several states were explored before West Virginia landed the deal.
The deal has been in process since 2022 and was endorsed by Jim Justice who was the Governor of West Virginia at the time.
He recommended that WVEDA approve the initial commitment of $75 million in financial support to acquire land, buildings, and equipment needed to get the project rolling. Justice was elected to represent W.Va. in the Senate in the 2024 election.
