LADWP Successful Bond Transaction Achieves Lowest Interest Rate in 15 Years
|LOS ANGELES – Tuesday, the Los Angeles Department of Water and Power’s (LADWP) Chief Financial Officer Jeff Peltola and staff presented the Board of Water and Power Commissioners with a report outlining the successful sale of $628.6 million in Water System Revenue Bonds, 2016 Series A, at a low interest rate of 3.19 percent – the lowest rate achieved by the utility in 15 years. The utility also announced $97.7 million in total debt service savings over the next 24 years through the refinancing of $183.9 million of currently outstanding high interest debt during the transaction.
The low-interest sale was assisted by Standard and Poor’s upgraded credit rating on LADWP’s Water System Revenue Bonds from ‘AA’ to ‘AA+.’ In addition, two other global ratings agencies – Fitch Ratings and Moody’s Investor Services – have assigned ‘AA and ‘Aa2′ ratings, respectively, to the Water System Revenue Bonds.
“The favorable rating by Standard and Poor’s was sparked by the adoption of new rates, which was achieved only through support by the Board, City Council, and the Mayor,” said Marcie Edwards, LADWP General Manager. “This support has allowed LADWP to save money while we invest in repairing and replacing aging infrastructure throughout the City.”
In addition to the favorable bond rating, LADWP benefited from aggressive pre-marketing of the bonds and targeted investor outreach.
“The rate increase was a tough decision for the Mayor and City Council and this is tangible evidence that their support paid off for our ratepayers,” said Mel Levine, President of the Los Angeles Board of Water and Power Commissioners. “Maintaining high bond ratings enables us to finance much needed water infrastructure improvements at low interest rates. The less we spend on interest rates, the more we can spend directly on capital costs to get the work done.”
In the coming months, between May and June, LADWP will issue approximately $800 million in additional total bond transactions through three additional sales, Power System Revenue Bonds, Series A; Water System Revenue Bonds, Series B; and Power System Revenue Bonds, Series B.
LADWP, the nation’s largest municipal utility, issues tax-exempt revenue bonds to finance capital improvements designed to upgrade facilities to improve service and reliability for customers. The proceeds from the Water System Revenue Bonds sales will be used to finance a portion of the on-going water system capital improvements including replacing trunk lines, distribution mains, tanks, pumps, regulator stations and other infrastructure, and developing more local water supply through recycling efforts, groundwater clean-up and storm water capture. The funding will also be used to repay outstanding loans and refund other debt for savings.