Wisconsin heads into the market next week with a $322 million refunding that it is promoting on the state’s new investor relations website.
Pleased with the results of its first taxable advance refunding last fall, Wisconsin will again tap the structure to advance refund $224 million of GOs. The state will also current refund $108 million of GOs using a tax-exempt structure.
Jefferies LLC is the bookrunner and Ramirez & Co. Inc. is co-senior manager. Acacia Financial Group Inc. is advising the state. Foley & Lardner LLP is bond counsel. The state expects at least 10% in present value savings, said capital finance director David Erdman.
The state, long a promoter of strong disclosure policies, decided to join the ranks of issuers with investor sites powered by BondLink. The state believes the
“The Municipal Securities Rulemaking Board EMMA site is a great source for investors and our capital finance site is also a great platform but moving forward if we needed a means to communicate” with investors quickly, establishing the site now “positions us better in the future if needed,” Erdman said.
Erdman sees potential pricing benefits as the state may reach more investors by making its “disclosure information visible in multiple places to investors who are trying to digest a large and busy calendar.” Erdman declined to put a dollar figure on the costs but said he expects increased demand for state paper to offset the price.
Rating agencies recently affirmed the state’s ratings on a new money sale. The state’s GOs are rated AA-plus by Kroll Bond Rating Agency, Aa1 by Moody’s Investors Service, and AA by S&P Global Ratings.
“The state's Aa1 general obligation rating reflects a well-funded pension system and limited OPEB liability, moderate but steady economic growth, conservatively managed budgets and adequate liquidity,” Moody's wrote in its last report.
Kroll revised its outlook to positive over the summer to reflect “the state’s continued fiscal discipline and the resulting improvement in its financial reserves,” Kroll wrote.
The state continues to watch the market closely and can jump in quickly with a long planned $622 million refunding of taxable 2008 appropriation-backed debt. The deal will generate savings while shedding floating-rate risk and exposure on swaps linked to Libor.
Erdman began eyeing the transaction last year given low taxable rates and high demand for the paper. “We will mitigate the risks we are concerned about and realize a material amount of savings,” Erdman said late last year as the deal was in the works.
Citi is the book-running senior manager and Barclays is the co-senior. Proceeds will also cover swap termination costs with that price tag the subject of negotiation with counterparties Citibank NA, UBS AG, and JPMorgan Chase Bank NA, Erdman said.
The 2008 bonds refunded debt issued in 2003 to pay unfunded accrued liabilities for sick leave conversion credits and unfunded pension liabilities for the Wisconsin Retirement System. The system is now fully funded.
Libor, an acronym for the London Interbank Offered Rate, is being phased out at the recommendation of the Alternative Reference Rates Committee created by the U.S. Federal Reserve Board and the Federal Reserve Bank of New York. Market participants have been concerned over tax uncertainties posed by the transition.
The deal remains on the day-to-day calendar as taxable rates, credit spreads, and other factors all influence the cost of the swap termination costs and refunding escrow and so far have failed to meet the state’s targets.
“We are just waiting for the right market to complete the transaction with a benefit to the state,” Erdman said.
Aaron Heintz also recently returned to the capital finance office after a stint elsewhere in state government. He serves as deputy capital finance director.
