More bonds purchased by Oklahoma investors than any other state issue

Oklahomans invest in GRDA

Oklahoma City – The Grand River Dam Authority took another step towards expanding its electric generation assets this week with the issue of $575-plus million in revenue bonds. The Authority also established new Oklahoma thresholds with the issue when local investors placed $128 million in retail sales orders on Tuesday. That carried over into heavy institutional orders on Wednesday, resulting in better financing costs for GRDA’s Oklahoma customers.

The bond issue will provide GRDA with proceeds to purchase a 36 percent interest in the Redbud Plant, a natural gas-fired power plant near Luther. Proceeds will also be used to make capital improvements to the Vinita-based electric utility’s existing generation and transmission system.

GRDA completed pricing for the issue, the largest ever co-senior managed by an Oklahoma-based financial institution (Capital West of Oklahoma City), at its Oklahoma City office on Wednesday.

“In the past, issues like this would have been priced with the financial community during meetings in New York City,” said GRDA Chief Executive Officer Kevin Easley. “However, because of the involvement with Oklahoma-based firms, we thought it was appropriate to finalize the deal here, close to them.”

Easley added that New York-based Citigroup also served as co-senior manager and lead on the financing with Capital West.

“This is the largest bond issue for which Capital West has ever been a senior underwriter,” said Chris Cochran, Executive Vice President and Director of Public Finance with Capital West Securities. “We are honored to be a part of this issue.” 

On Monday, GRDA also secured Berkshire Hathaway Inc. as the bond insurer. Berkshire Hathaway is the Omaha, Nebraska-based firm headed up by billionaire investor Warren Buffett.

“This is the first time an Oklahoma state agency has been able to secure this distinguished firm as a bond insurer,” said Easley. “It reinforces for us how well this issue has been received, and the recent, positive financial strides GRDA has made.”

Cochran’s comments were similar. “Berkshire Hathaway is an extremely selective firm,” he said. “Without the recent improvements in GRDA's financial condition and credit rating upgrades, there is no way that Berkshire would have agreed to insure this issue. The fact that the firm is willing to stand behind GRDA on this bond issue is a very big deal.”

The size of the GRDA bond issue, along with a proven track record, is also working in GRDA’s favor, said Oklahoma State Bond Advisor Jim Joseph. “I think there is always a good demand for GRDA bonds,” he said. “It’s been a while since the agency sold any, but GRDA always gets a good response.”

The amount of retail sales is proof of that, he added, saying that those sales “really validate the things GRDA has done to prepare for this issue.” At one point, bond orders outpaced available bonds in certain maturities by more than $330 million.

According to Cochran, the retail sales, which stood at $76 million Tuesday afternoon (September 9) before climbing to $128 million by the end of the day, may be driven in part by the fact that GRDA is an Oklahoma entity with a proven track record in the bond market.

“There really is something about these bonds,” he said. “People have special feelings about the GRDA. It may be due to the large issues back in the 1970s, but whatever the case, when GRDA issues bonds, which isn’t often, people want to own them. So far we’ve seen more bonds filled out to Oklahoma retail investors than any other bond issue in the state of Oklahoma.”

The successful retail sales seemed to carry over into the institutional sales and "we believe the response we've had from bond buyers, especially Oklahoma bond buyers is a strong message that these people are very confident in GRDA today," said Easley. "We view the response to our bond issue as a great report card."

The utility is moving forward with the bond issue on the heels of two credit rating upgrades. On August 14, Standard & Poor’s Rating Services announced it had assigned an “A” rating to GRDA’s revenue bonds, while moving the outlook from positive to stable. That announcement came just ten months after S&P gave GRDA the first rating upgrade in the utility’s recent history: an upgrade from “BBB+” to “A-“assigned last October. Then, on August 28 Fitch Ratings announced that it would also upgrade the GRDA credit rating to “A” from “A-“while also revising the outlook from positive to stable.

That improved financial standing will be evident in the bond issue, said GRDA Chief Financial Officer Carolyn Dougherty.

“A better credit rating equals tremendous savings in bond related costs,” said Dougherty. “Over the life of the bond, the difference between an A minus and A rating can be millions of dollars, because the better rating means lower finance and insurance charges. That puts GRDA in a much stronger position, and a stronger GRDA is better for Oklahoma."

On the same day, the Oklahoma Council of Bond Oversight gave its unanimous approval to GRDA's plan to issue the bonds. 

“Unanimous approval was very important to us,” said Easley. “It tells us that Oklahomans with a solid understanding of bond issues fully support what we are doing.”

Easley also credited the strong support and leadership of GRDA’s board members, who have made many, and sometimes difficult, decisions in recent years to shore up the utility’s finances.

“Our board understands the tremendous benefits of GRDA to the state of Oklahoma and has guided this organization to a place where we can provide those benefits for many years to come,” he said.

A self-supporting state agency, GRDA is funded by the revenues from the sale of electricity instead of taxes. GRDA transmits and delivers electricity across its 24-county service area via a sophisticated energy delivery system that includes over 1,900 miles of transmission line. GRDA sells wholesale electricity to three customer classes: municipals, electric cooperatives, and industries.

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Attachments:

Chart detailing recent GRDA credit rating upgrade history:

An aerial view of the Grand River Dam Authority's Salina Pumped Storage Project, part of the utility's overall generation and transmission system. Some proceeds from the utility's recent bond issue will be used to make capital improvements across the system.

 

 

Grand River Dam Authority News Release

Contact: Justin Alberty
Corporate Communications Director
Grand River Dam Authority
(918) 256 5545
jalberty@grda.com
www.grda.com

For immediate release: 9/10/08