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Snohomish County PUD Bond Refinancing, New Issuances Get Low Interest Rates and Strong Bond Ratings Snohomish County Public Utility District announced it has completed a significant $361 million financing program to fund several capital construction projects.
The financing includes $219 million of tax-exempt bonds and $142 million of taxable “Build America” bonds. The objective is to refinance variable-rate bonds to fixed-rate debt and to issue new bonds for the capital projects.
The PUD had $235 million of tax-exempt, variable rate bonds outstanding that were sold in three different financings in 1995, 2001 and 2002. In order to reduce the risks associated with variable rate debt and take advantage of the very low long-term tax-exempt interest rates currently available, these older bonds were redeemed with the new, fixed-rate, tax exempt bonds with various maturities through 2024. The weighted average interest rate on these new tax-exempt bonds is 3.18 percent.
In addition, the PUD sold new money bonds to finance capital projects over the next three years, including electrical distribution system expansion and improvement projects, construction of an addition to the utility’s operations center, and construction of a low-impact hydroelectric project near Monroe. Most of the new money bonds were issued as Build America Bonds authorized under the American Reinvestment and Recovery Act.
Build America Bonds are taxable bonds that provide for a subsidy from the federal government that drives the effective interest rate to levels at or below the rates for tax-exempt bonds. Net of the federal subsidy, the PUD will pay an average rate of 3.68 percent on the new money bonds, with final maturities in 2040.
As part of the sale of bonds, the PUD secured rating affirmations from Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings of Aa3, AA-, and AA-, respectively. Moody’s also indicated a positive outlook for the PUD. The strong ratings are noteworthy in the current market given rating agencies are increasingly risk adverse due to the national recession. Financial analysts granted the high ratings based on the PUD’s strong cash position, financial stability, moderate debt burden, prudent management, and resource planning that allows it to comply with environmental regulations while still accommodating load growth. “The PUD Board of Commissioners has provided solid policy direction that will help ensure continued strength for utility,” said PUD General Manager Steve Klein. “These policies have earned outstanding ratings from the bond market, confirming that we are managing our finances in a prudent manner and keeping our cost of borrowing low.” |
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