The Shield – Market and Company Update

Blue Rose Presented at the WHEFA Lunch & Learn Webinar

Blue Rose Capital Advisors Erik Kelly, President, and Brandon Lippold, Vice President, shared industry insights and financial strategies to address unique market activity during their presentation at the Wisconsin Health & Education Facilities Authority’s (WHEFA) Lunch & Learn Market Update Webinar on March 26th, 2024. The discussion delved into various topics including year-to-date 2024 market activity, expected Fed rate activity, market performance amidst declining short-term rate environments, interpreting the “noise” during an election year, and prevailing capital planning strategies.

The recorded version of the webinar is available here. Additionally, WHEFA announced plans for their annual in-person Workshop on Tuesday, October 1st, along with a golf outing scheduled for Monday, September 30th. More information on the workshop can be found here.

Blue Rose Announces a Partnership with Excelsior Capital Advisors

Blue Rose Capital Advisors LLC recently announced our partnership with Excelsior Capital Advisory Services LLC. As an independent municipal advisor to higher education and non-profit organizations, Blue Rose will serve as a co-advisor with Excelsior in providing various capital planning and debt-execution advisory services to Excelsior’s clients.

As a trusted municipal advisor to many higher education and non-profit institutions, particularly in the state of New York and the Northeast, Excelsior has many long-standing client relationships to which Blue Rose, jointly with Excelsior, will provide value-additive services. Tom Cullinan, Principal at Excelsior, brings a wealth of industry experience to the partnership, with over 30 years of experience in higher education and non-profit public finance, including previously serving as a Managing Director at RBC Capital Markets before starting Excelsior in 2014.

Blue Rose Will Present at the MHEFA Conference

Blue Rose Capital Advisors’ Erik Kelly, President, and Max Wilkinson, Vice President, are presenting on the Municipal Advisor Panel at the MHEFA 36th Annual Conference in St. Paul, MN, on April 17, 2024.

Learn more about the conference and register to attend virtually or in-person here.

Comparable Issues Commentary

Shown below are the results of two higher education financings that priced in March. On March 5th, the Regents of the University of California (“UC”) priced its tax-exempt General Revenue Bonds, 2024 Series BV. Roughly three weeks later, on March 27th, Purdue University (“Purdue”) priced its tax-exempt Student Fee Bonds, Series GG. Both transactions were refunding issues, with Purdue’s deal refinancing its outstanding Student Fee Bonds, Series BB-1 and its Series Z-2 Build America Bonds. UC’s deal refunded two series of Build America Bonds – its General Obligation Revenue Bonds, 2009 Series R, and General Obligation Bonds, 2010 Series F. ⁱ

Both deals were highly rated, with Purdue rated Aaa and AAA by Moody’s and S&P, respectively. UC’s bonds were rated two notches lower at Aa2, AA, and AA from Moody’s, S&P, and Fitch, respectively. UC’s transaction was much larger than Purdue’s, coming in at $1.092 billion in total par amount compared to roughly $72.5 million in total par amount for Purdue. Purdue’s Series GG bonds are non-callable while UC’s bonds have a standard 10-year par call provision. The structures of the two transactions were relatively similar, with both issues fully serialized, though the final maturity of UC’s bonds stretches 10 years further to 2045 (in comparison to Purdue’s final maturity in 2035). Both transactions exclusively utilized 5% coupons.

In the two weeks leading up to UC’s pricing at the beginning of March, MMD remained mostly unchanged, with a handful of tenors moving from a basis point higher to four basis points lower. On March 5th, UC’s pricing date, MMD remained unchanged across the curve. UC was ultimately able to achieve spreads as low as -23 bps at the front end of the yield curve, peaking at +6 bps to MMD for the latter maturities. The UC pricing benefitted considerably from California’s status as a specialty state for municipal bonds, with high state taxes materially enhancing the value of California issuance for investors. Over the next three weeks, MMD increased meaningfully, especially on the front end of the curve. The 1-3-year tenors on the curve jumped 17-18 bps, while the rest of the curve saw upward moves of between 5-12 bps. On March 27th, Purdue’s pricing date, the index climbed higher on the first five years of the curve by 3-5 bps while the 20-30-year tenors declined by 2 bps. Despite those headwinds, Purdue was able to achieve spreads ranging from -12 bps on the 2025 serial maturity to +16 bps on its final maturity in 2035.

ⁱ In an interesting turn of events, bondholders of the refunded Build America Bonds in the University of California transaction have threatened a lawsuit challenging the University’s ability to redeem the bonds via an extraordinary redemption provision (“ERP”) . The argument centers on UC’s ability to trigger the ERP due to cuts to the Build America Bonds subsidies, which were reduced starting in 2013 through government sequestration.

Interest Rates

Meet the Author:

Brandon Lippold | [email protected] | 952-746-6054

In his role of Vice President, Brandon Lippold is focused on growing client management responsibilities, in particular ensuring that our clients’ transactions run smoothly through closing. He has significant expertise in direct purchase bonds and derivative products and is experienced with the pricing and execution of fixed rate bond transactions and reinvestment products. Mr. Lippold is closely involved in every step of the financing process for clients, from initial capital planning stages all the way through closing. He joined Blue Rose in 2018 as a Quantitative Analyst.

Media Contact:

Laura Klingelhutz, Marketing Coordinator

952-208-5710