Build America Bond Refunding

CASE STUDY: Arapahoe County Water & Wastewater Authority (ACWWA)

The Goal

Arapahoe County Water and Wastewater Authority (ACWWA) issued a series of Build America Bonds (BAB) in 2009 to finance expansion of the Water Authority’s water distribution portfolio. The bonds’ highly-restrictive refunding regulations made use of either an extraordinary call (due to the reduction of the subsidy) or an advance refunding economically unfeasible. Contrary to stated rules for these bond types, underwriters approached ACWWA several times over two years pitching refunding concepts and suggesting those options were in ACWWA’s best financial interests. The Authority sought Ehlers help to determine their best options.

The Solution

ACWWA officials engaged Ehlers for debt issuance & management services. Ehlers evaluated the proposed refundings. Initially, they looked promising from a savings perspective. However, the “make-whole” call provisions included in the indenture gave our Advisors pause and after consultation with ACWWA’s bond counsel, made a final determination these provisions made any refunding of the BAB economically unfeasible. Switching gears, Ehlers crafted a plan to undertake refunding at the earliest possible date to maximize savings and minimize loss of the Federal subsidy. As part of that plan, we went to market with an RFP for underwriting services on behalf of the Authority, which yielded 10 qualified underwriters. Ehlers advised on the selection of two firms to co-manage the transaction.

The Results

In October 2019, Ehlers working with the co-managing firms, developed an indicative pricing scale that was taken to the market. Following the initial order period, yields were tightened in 17 of the 20 maturities reducing the overall cost of the bond issue. Savings of the transaction exceed the pre-sale projections.