You are here:  Main / Customer Services / Public Communications Division / 2009 / Wastewater Sewer Bonds Yield Solid Showing



(Monday, September 21, 2009) – The City and County of Honolulu successfully sold $275 million of Wastewater System Revenue Bonds on Tuesday, September 15.  The sale was composed of two offerings – one senior lien for $148 million and one junior lien for $127 million.

         Mayor Mufi Hannemann said, “Our ability to sell our bonds at attractive rates is a reflection of our sound City fiscal policies, our commitment to making much-needed investments in our sewer and waste water treatment infrastructure, and our willingness to raise sewer fees to pay for these repairs.  We are delivering on our promises, and our ability to finance our capital improvements provides ample evidence of our accomplishments.”

         The 2009 Senior Lien bonds were sold to finance $100 million of new wastewater projects and to refinance $44 million of outstanding bonds carrying higher interest rates.  The City was able to sell the new money portion of the senior bonds at an interest cost of only 3.84 percent – the lowest cost of any wastewater financing sold to date.  The City achieved this milestone by being the first public entity in Hawaii to take advantage of the Build America Bond and Recovery Zone Economic Development Bond programs, which are part of the American Recovery and Reinvestment Act of 2009.  These two programs involve the sale of taxable bonds.

         In turn, the U.S. Treasury will provide the City with an interest rate subsidy of 35 and 45 percent, respectively, over the life of the bonds.  The subsidies make the taxable bonds more cost effective than traditional tax-exempt bonds.

         The refinancing portion of the Senior Lien bonds will generate $3.1 million of debt service savings in today's dollars – representing 7.0 percent of the refinanced amount of bonds.

         The 2009 Junior Lien bonds were sold solely to refinance $131 million of previously issued bonds.  All of these bonds were sold as traditional tax-exempt bonds.  The City will realize $10.9 million of debt service savings in today’s dollars – representing 8.3 percent of the refinanced amount of bonds.  Interest rates have moved so much lower over the past two months that the City will see more than twice the amount of savings originally projected in July.

         The Senior Lien bonds were rated “Aa3/AA-/AA-” by Moody’s, Standard & Poor’s and Fitch Ratings respectively.  The Junior Lien bonds were rated “A1/A+/A+” by Moody’s, Standard & Poor’s and Fitch Ratings respectively.  In connection with this bond sale, Fitch revised its outlook on all of the City’s wastewater bonds from “Negative” to “Stable.”  Fitch said that the revision rating outlook was based, in part, on the very strong financial position of the system and the pro-active steps taken by management.  The administration’s strong and consistent support for the wastewater program was also cited as a critical factor in their decision.  Investors responded favorably to the change in rating outlook.

         Merrill Lynch & Co. served as the lead underwriter for the two bond offerings with Piper Jaffray & Co. as the co-manager.  A one-day retail order period for the bonds on Monday generated more than $200 million of orders from retail customers, both in Hawaii and on the Mainland – a record amount for any past City bond sale.  Local financial institutions also participated actively in selling and purchasing many of the bonds.





Markus Owens, ENV Public Communications Officer, 768-3454