Public Finance

An Innovative Approach to Financing a Regional Water Authority


Independent thinking will help save more than $1 million for the South Carolina’s Kershaw County and Lee County Regional Water Authority.

Stephens served as Sole Manager to the Kershaw County and Lee County Regional Water Authority, South Carolina (the “Authority”), previously named the Cassatt Water Company, on the issuance of $22,650,000 Water System Improvement and Refunding Revenue Bonds (the “Bonds”), Series 2014 A&B.

$18,805,000 Tax-Exempt Water System Improvement Revenue Bonds, Series 2014A

$3,845,000 Taxable Refunding Revenue Bonds, Series 2014B

Closing Date: 03/27/2014

Rating: BAM Insured: AA (A+/A3)

The purpose of the issue was two-fold. $18,805,000 Series A bonds were tax-exempt for water system improvements and $3,845,000 Series B bonds were taxable to refund two outstanding private placement loans. The Series A bonds were sold as discount term bonds with sinking fund maturities in 2029, 2034 and 2044. The Series B bonds were sold as par serial maturities from 2016-2023. The Series A bonds were fixed rate with a True Interest Cost (“TIC”) of 4.13% and an All Inclusive Cost (“AIC”) of 4.39%. The Series B bonds were also fixed rate with a TIC of 3.07% and an AIC of 3.75%.

While the Authority had acquired debt previously on a private placement basis, it had no public debt ratings and had not issued any public debt. Because of our utilities banking expertise, was asked to serve as underwriter by both Bond Counsel, Pope Zeigler, LLC, and the Financial Advisor, First Tryon Securities. During the credit rating process, Stephens recommended utilizing two unique evaluation services from S&P and Moody’s. This unusual approach allowed the Authority to receive indicative ratings from the credit committees of both rating agencies for two different structures; one with a cash funded debt service reserve fund (“DSR”) and one without. Without this approach, the Authority would have only gone to both rating agencies with a funded DSR. Consequently, the Authority received similar ratings from S&P and Moody’s with and without a funded DSR, thereby confirming the Authority’s credit strength. In the end, issuing the bonds without a funded DSR, Stephens saved the Authority approximately $100,000 in gross annual debt service and $1 million over the life of the transaction.

Stephens priced the transaction aggressively, with the 2029 and 2034 maturities spread 46 and 42 basis points tighter to MMD, respectively, on the yield to maturity for similar maturities for a higher rated (AA BAM insured/A2) Bell County, TX utility transaction priced the previous week. Furthermore, the elimination of a DSR and aggressive pricing by Stephens provided the Authority the opportunity to borrow an additional $1.5 million on the day of pricing for capital projects and still maintain the debt service coverage levels as originally stated in the feasibility report.

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