Transaction Details

City of Hutto

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On Thursday, June 6, 2024, Baird served as senior managing underwriter to the City of Hutto (the “City”) on its Series 2024 General Obligation Bonds (“GO Issue”) and Series 2024 Combination Tax and Revenue Certificates of Obligations (“CO Issue”). Proceeds from the sale of the obligations will be used for transportation improvements and water & wastewater system improvements.

Late May was a difficult environment for municipal issuers as benchmark rates and credit spreads increased on concerns interest rates would remain “higher for longer”. On tap for the week of June 3 was the largest new issue calendar since 2017, which presented the possibility that conditions could further deteriorate if investor confidence remained low. The tone moving into the week, however, turned decidedly positive as a string of soft economic news increased investor willingness to put June reinvestment dollars to work. This backdrop provided a firm foundation for pricing the City’s GO and CO Issues.

The smaller $16 million GO Issue was structured with serial bonds maturing 2029-2036 and term bonds due in 2038, 2040, 2042, 2044 and 2049. Term bonds were used past 2036 to further investor interest by taking advantage of a relatively flat yield curve to increase block size. The larger $285 million CO Issue was structured with serial bonds from 2026-2044 and term bonds due in 2049 and 2054. For both issues, term bonds due in 2049 and 2054 were priced at a discount to accommodate the City’s need for limited premium as well as to differentiate the bonds from those in similar transactions priced with premium couponing earlier in the week.

The discount structure led to a great book of business with the $69 million 2049 CO Issue term bonds subscribed 7.8x, the $105 million 2054 CO Issue term bonds subscribed 5.5x and the $6.2 million 2049 GO Issue term bonds subscribed 4.9x. The CO Issue serial bonds maturing 2036-2044 also saw excellent interest with subscriptions of 5.0x to 9.4x. These portions of the deal were successfully repriced with yields 4 to 9 basis points lower. As expected, there was limited interest in the smaller GO Issue serial maturities. Baird took down remaining unsold maturities in years 2031-2033 and maintained preliminary pricing levels for this segment of the issue. In aggregate, Baird’s sales team placed over $1.66 billion in orders from 54 unique investors to support the transaction. The true-interest cost was finalized 5 basis points lower than that implied by the preliminary pricing scale at 4.33%.