Florida continues to work
Issuers have turned to tenders since the Tax Cuts and Jobs Act of 2017
Using its own cash instead of cash from the sale of refunding bonds is not typical, but offers benefits, said Public Resources Advisory Group Senior Managing Director Wendell Gaertner, Florida’s advisor on the deal. “Without the need for a replacement bond issue there is less execution risk for bondholders and the tender can target and offer a premium for lower-coupon bonds that generally have less liquidity in the market.”
The tender in this case is solely to reduce the state’s debt and annual fixed costs, said Ben Watkins, Florida Division of Bond Finance director.
The tender offer is the third phase of the state’s efforts to reduce fixed costs and debt outstanding. Starting around 2010, the state began current refundings but ran out of candidates. The state implemented a
Watkins said his division picked 118 CUSIPs for the tender that have limited demand in the secondary market, offering a premium above current trading levels.
Florida has about $500 million to purchase outstanding bonds. Normally 25% to 33% of those offered tenders accept them, Watkins said. If the acceptances exceed $500 million, the state will execute the tenders that save it the most money.
The state is offering to purchase the bonds at 61.3% to 99.8% of par, with most of the offers in the 80% to 90% range. Bondholders who accept the offer will also get accrued and unpaid interest.
J.P. Morgan Securities, BofA Securities and Loop Capital Markets are managing the tender.
Florida posted a notice to the Municipal Securities Rulemaking Board’s EMMA website last week announcing the tender, which has an acceptance deadline of 5 p.m. Eastern Time Oct. 23.
The bonds offered for tender are State Board of Education Public Education Capital Outlay bonds, Series 2016B, 2016C, 2016D, 2016E, 2016F, 2016G, 2017A, 2017B, 2017C, 2018B, 2019C, 2019D, 2020A, and 2021B; Department of Transportation, right-of-way acquisition and bridge construction bonds Series 2016B, 2017A, 2019B, Series 2020A, and Series 2021A; and Department of Transportation turnpike revenue bonds, Series 2019B, 2020B, 2021A, 2021B, and 2021C.
Tenders