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DRPA Announces Successful Bond Sale
New bond proceeds shift the Authority’s entire debt portfolio to a traditional fixed rate
Camden, NJ - The Delaware River Port Authority (DRPA) today announced the sale of $700.5 million of the Authority’s 2018 Revenue Bonds. Proceeds from the sale will be used to fund $290 million in projects for the Authority’s 2019 Capital Plan, refund all of the Authority’s outstanding variable rate debt (over $450 million of outstanding variable rate bonds) and terminate all of the Authority’s remaining interest rate hedge agreements (swaps).
The Authority’s strong financial position, scarcity of Authority bonds in the market place, recent rating upgrades and opportunistic timing, enabled the Authority to engage in a successful offering as highlighted by below:
- The Authority offered potential bond investors competitive interest rates and, in doing so, received more than $4.7 billion in offers from interested bond purchasers for the $700.5 million in 2018 Revenue Bonds available (i.e., the issue was oversubscribed 6x);
- As a result of the overwhelming interest, the Authority was able to lower yields between 2 and 12 basis points (i.e., 1/100th of a percentage point), thereby significantly lowering the overall cost of the borrowing;
- The overall borrowing cost (referred to as “True Interest Cost” or “TIC”) for the borrowings was 3.23% with bonds maturing in the years 2020 through 2040 (including a small taxable portion maturing in 2020).
- In November just prior to the bond deal, S&P Global Ratings (S&P) raised its long-term underlying rating (SPUR) on the DRPA revenue bonds outstanding to ‘A+’ from ‘A’ and its rating on the DRPA’s port district project bonds to ‘A’ from ‘A-’. The outlook is 'stable'. At the same time, Moody’s Investors Service (Moody’s) assigned ‘A2’ rating to the 2018 Revenue Bonds and affirmed the rating on DRPA’s existing revenue bonds at ‘A2’ and the rating on the outstanding Port District Project (PDP) bonds at ‘Baa2’. The rating outlook was changed to ‘positive’ from ‘stable’.
As a result of the refunding portion of the borrowing, the Authority has refunded all of its variable rate debt and terminated all of its remaining interest rate swap agreements. In doing so, the Authority has no remaining variable rate interest rate exposure and its entire debt portfolio consists of traditional fixed rate debt. This move reduces overall debt service by approximately $63 million over the term of the Authority’s debt through 2040 at no net cost to the Authority or its customers.
“The Authority has worked hard over the past decade to demonstrate commitment to prudent stewardship over our financial assets,” said James M. White, DRPA Chief Financial Officer/Treasurer. “We are pleased with the very successful sale of the Authority’s 2018 Revenue Bonds.”
The bonds were sold with the assistance of the Authority’s independent registered municipal advisors, Acacia Financial Group, Inc. and Public Financial Management (PFM) and its co-bond counsel, Parker McCay P.A. and Ahmad Zaffarese LLC. The sale closed on December 18, 2018.
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