Guam – The Guam Waterworks Authority successfully borrowed $118.8 million overnight in New York.
CCU Chairman Simon Sanchez told the K-57 Breakfast Show Wednesday morning that GWA’s Municipal Bonds were oversubscribed with $360 million dollars in investor money biding for the $118 million dollar bond issue which sold out within 40 minutes. $500-thousand dollars of the bond issue was bought by Guam investors.
Sanchez said that the money will enable GWA to finish the 7 outstanding issues that remain in the Stipulated Federal Order which requires GWA to come into compliance with the Clean Water Act.
Among the priority projects that the funding will pay for are the repair and replacement of drinking water tanks, finishing the work on the Ugum Water Treatment Plant and replacing the island’s aging water lines.
The funding will not be used to upgrade Guam’s wastewater treatment plants.
The high over-subscritption rate enabled the final interest rate to be cut by 7 basis points from 5.87% down to 5.87%. That rate is well below the 7.5% rate authorized by the Guam legislature.
Sanchez said the high demand and quick sale is a sign of strong investor confidence in GWA and Guam.
The bonds were triple tax-exempt senior revenue bonds rated ‘Ba2’ by Moody’s and ‘BB’ by Fitch Ratings which are non-investment grade category ratings. The transaction was led by Citi and Barclays, the underwriters, with Pacific Public Finance Group LLC as financial advisor.
In a release, GWA syas:
The market was ripe for GWA’s issue this week. Interest rates have declined to near historic lows and issuers have planned large issuances in order to take advantage of the positive market tone. GWA accelerated the pricing by one week, in order to get ahead of massive supply of bonds planned in the coming weeks, including a potential multi-billion dollar State of California transaction. Over the last week, GWA and GEDA heavily marketed the bonds to investors, participating in an investor internet road show and one-on-one investor calls.
During the pricing process, the municipal market shifted with long-term rates moving upward, however, the interest rates that GWA locked in were reduced by over five basis points due to strong investor demand. Tony Blaz, GEDA Administrator, stated that “The aggressive marketing and strategic timing based on market conditions were key. This is evident in the interest rate realized, especially in comparison to the GPA bonds issued a few months ago. ”
Guam residents and businesses were given the opportunity to purchase the bonds during a special Guam retail order period on Monday. According to Blaz, “Over half a million of the bonds were sold on island to Guam residents or businesses, which of course, were given priority over other investors.”
Simon Sanchez, Chairman of the CCU, stated that he is “happy that the marketplace has shown confidence in GWA’s improvement and confidence in the people of Guam and our exciting future. With this money, GWA can complete the seven remaining items in stipulated order and continue to improve the water and wastewater system.
We especially want to thank our ratepayers and the hard working employees of GWA, the Governor, the Legislature, the PUC, and the CCU. We also want to thank the financing team led by the Guam Economic Development Authority, our financial advisor, Aulii Taitano Limtiaco of Pacific Public Finance Group, our team of underwriters, Citi and Barclays, our bond counsel Orrick, and our consulting engineer, R.W. Beck. It was a great team effort producing a very good result for our people.”