Water Authority Executes $139.9 Million Senior Lien Bond Sale

 
Short Title
Water Authority Executes $139.9 Million Bond Sale
Refunding sale saves $13.5 million, reducing financing costs for water reliability projects

The San Diego County Water Authority this week completed a $139.9 million bond sale that will help reduce the cost of financing vital water supply reliability projects.

The sale, Senior Lien Water Revenue Refunding Bonds Series 2011A, refunded $150 million in long-term fixed-rate bonds from the agency’s 2002A series. High competition for the bonds led to securing a low, fixed rate of 3.22 percent, which will save the Water Authority $13.5 million on a present-value basis over the 15-year life of the bonds.

“Despite some uncertainty in the market, our strong financial management policies and credit ratings helped us secure very favorable terms that will reduce costs for our ratepayers,” Water Authority Director of Finance Eric Sandler said.

This week’s sale is the latest in a series of actions taken to manage risk and reduce the cost of the Water Authority’s debt portfolio for financing its Capital Improvement Program. Earlier this month, the Water Authority successfully completed an $86.63 million subordinate lien bond sale to help restructure its variable-rate debt portfolio to take advantage of favorable market conditions.

The Water Authority has one of the largest capital improvement programs among California urban water agencies, with a $3.5 billion budget and a two-year appropriation of $321 million for fiscal years 2012 and 2013. Payments on debt used to finance these capital projects – vital water infrastructure projects such as dams, large-diameter pipelines, a treatment plant, hydropower facilities and more – also is a significant cost. The Water Authority estimates debt service costs represent $280 million, or 20 percent of its total budget, for fiscal years 2012 and 2013.

The Water Authority holds long-term senior lien credit ratings of AA+, AA+ and Aa2 from Standard and Poor’s, Fitch and Moody’s, respectively. The Water Authority also holds subordinate lien credit ratings from those agencies of AA, AA and Aa3, respectively. (Subordinate lien credit ratings are typically at least one level below senior lien credit ratings.) The Water Authority’s current credit ratings are considered high quality by all standards and are held by only a few select water agencies in California.