Municipal Finance Case Studies

The transaction was the third largest issue to come to market in 2023 at the time of issuance. It was also the largest negotiated issue of the week with competition from heavy supply ($11 billion) the week of April 17.

The transaction consisted of four separate series (one taxable, three tax-exempt), with bond proceeds largely attributed to the State’s $45 billion capital program, “Rebuild Illinois.”

As recently as March 2021, the State was rated Baa3 (neg)/BBB-(st)/BBB-(neg) but has since experienced seven bond rating upgrades and two positive outlook changes under the Pritzker Administration’s leadership leading up to this transaction. With the latest round of upgrades, the State entered the market with the momentum of new A-/A3/BBB+ ratings, which would expand and broaden the State’s appeal to investors.

May 2023 A&B Bonds were structured with shared 25-year level principal. 2023C Bonds were structured with 10-year level principal. May 2023D Bonds included the refunding of $1.22 billion of currently callable bonds.

Series:

• $200,000,000 Taxable Series of May 2023A (“May 2023A”)
• $1,000,000,000 Series of May 2023B (“May 2023B”)$150,000,000 Series of May 2023C (“May 2023C”)
• $150,000,000 Series of May 2023 C (“May 2023C”)
• $1,161,210,000 Refunding Series of May 2023D (“May 2023D”)

Sale Date: April 19, 2023

Settlement: May 10, 2023

Ratings: 

• Moody’s: A3 (stable)
• S&P: A- (stable)
• Fitch BBB+ (positive)

The University’s utility system includes electricity, steam and condensate, domestic water, chilled water, sanitary sewage, storm water, compressed air, and reclaimed water. 

Concessionaire is Sacyr Plenary Utility Partners Idaho, with McKinstry Essention, LLC acting as sub-operator, is the exclusive operator of the University’s utility system subject to limited exceptions, and will receive the following fees for operating the system following agreed upon performance standards: 

• Fixed fee of $7.6MM per year, escalating at 1.5% per annum starting in FY2027 
• Variable fee consisting of an agreed upon return for all capital improvements to the system 
• Operating fee tied to historical operating and maintenance costs adjusted for inflation. 

Bulk of the upfront proceeds will be placed into a new strategic investment fund, which will be used to fund the University’s planned strategic initiatives. 

Transaction reached financial close on December 30, 2020.

The $1,007,490,000 tax-exempt series was structured with a mix of coupons – 5% semiannual serial bonds from 2024-36, 5% term bonds in 2037-38, 2044, & 2058, a 5.25% term bond in 2051, and term bonds priced at par in 2039, 2040, 2041, 2043, & 2048.

The $5,080,000 taxable series was structured with annual serials in 2024-29 & 2032-38 and term bonds in 2031, 2043, & 2053.

Series:

• 2023 A $1,007,490,000 tax-exempt
• 2023 B $5,080,000 taxable

Wells Fargo Securities role: Bookrunning senior manager

Sale date: September 27, 2023

Delivery date: October 23, 2023

Ratings:

• S&P: AAA (stable)
• Fitch: AAA (stable)

The transaction was the largest General Obligation issue to come to market in 2023 at the time of issuance.

The High-Speed Passenger Train was the marquee project of the issuance. The transaction included three maturities that were index eligible, which appealed to a broader set of investors.

Series: 2023 $1,804,055,000 federally taxable California exempt

Wells Fargo Securities role: Bookrunning joint senior manager (billing and delivery)

Sale date: March 8, 2023

Delivery date: March 15, 2023

Ratings:

• Aa2 (stable)
• AA- (positive)
• AA (stable)

This is the largest NYSHFA Affordable Housing Revenue Bonds issuance to date. The 2023 Series AB Bonds were issued for the purpose of financing the 2023 Mortgage Loans for the construction or acquisition and rehabilitation of 10 multifamily rental housing projects.

The 2023 Series A Bonds carry a Climate Bond Certified/Sustainability Bond designation and the 2023 Series B Bonds carry a Sustainability Bond designation based on, among other things, the expected use of proceeds to finance Projects that are expected to provide affordable housing and the energy efficiency standards and features of such projects.

Pricing launched the morning of March 21 amidst uncertainty in the market ahead of the March 22 FOMC meeting and ongoing banking headlines.

• The bonds were over 60 subscribed by retail investors totaling $313.1 million with Wells Fargo providing $221.9 million of retail orders
• Subscription levels totaled 2.4 x in aggregate and reached 5.2 x in the most subscribed maturity. Such demand allowed the syndicate desk to tighten spreads by 5 bps on six of the serial bonds and on the 2038, 2053, and 2058 term bonds as well as 10 bps on the 2063 term bond
• 49 investor accounts, many of whom were new buyers of NYSHFA bonds, with orders in excess of 1.2 billion
• Two investor orders were on behalf of ESG accounts

Series:

• $111,200,000 Affordable Housing Revenue Bonds, 2023 Series A1 (Climate Bond Certified/Sustainability Bonds)
• $230,915,000 Affordable Housing Revenue Bonds, 2023 Series A2 (Climate Bond Certified/Sustainability Bonds)
• $34,875,000 Affordable Housing Revenue Bonds, 2023 Series B1 (Sustainability Bonds)
• $125,725,000 Affordable Housing Revenue Bonds, 2023 Series B2 (Sustainability Bonds)

Wells Fargo Securities role: Senior manager

Sale date: March 21, 2023

Ratings: AA2 (Moody’s)

This transaction refinanced outstanding commercial paper and currently refunded Series 2014B and Series 2015A PUF bonds. It marked the System’s largest Permanent University Fund series of bonds issued to date.

• The System was able to obtain overall NPV savings of over $11.2 million, or 8.76% of the 2014B and 2015A refunded PUF bonds
• In the weeks leading up to pricing, WFS worked with the System to find a structure that took advantage of relatively attractive points along the yield curve and levelized the System’s aggregate PUF debt service structure in certain years
• Recently, there has been a heavier supply of AAA-rated Texas Permanent School Fund (“PSF”) paper (over $11.8 billion since December 1, 2023) and as a result, spreads during this period have been wider than traditional levels for PSF deals
• The System’s transaction priced tighter than PSF deals with par over $100 million that priced in February 2024
• For example, the System’s 5-year maturity is between 11-15 bps tighter than the AAA-rated PSF and Texas Higher Ed deals with par over $100 million that have priced in February

Wells Fargo Securities role: Bookrunning senior manager 

Sale Date: February 21, 2024

Settlement: April 2, 2024

Ratings: 

• Moody’s: Aaa (stable)
• S&P: AAA (stable)
• Fitch: AAA (stable)