The City of Philadelphia and Philadelphia Gas Works (PGW) have announced the successful pricing of $424 million worth of Gas Works Revenue Bonds. This financial move is part of an initiative to bolster PGW's infrastructure, with $315 million dedicated to enhancing the safety, reliability, and efficiency of the system. Moreover, the deal included the refinancing of approximately $119 million in existing debt, anticipated to save PGW about $7.8 million in net present value over the next 11 years, according to the city's official press release.
Investor demand soared for these bonds, with 66 different investors placing orders that were over five times the available bonds, demonstrating strong confidence in PGW's financial health. This exceptional interest, enabled PGW to secure even lower interest rates than expected, reducing the debt service by $3.2 million. Fitch Ratings, ahead of the bond sale, upgraded PGW's rating outlook to 'A' Positive from 'A' Stable, signaling an acknowledgment of PGW's strong and improving financial profile. Similarly, Moody’s Investors Service and Standard & Poor’s affirmed their Stable outlooks and ratings for PGW, marking a consistent appreciation for the utility's economic management.
The new Series A Revenue Bonds at $315 million will spearhead critical infrastructure projects for PGW. Meanwhile, Series B Revenue Refunding Bonds aim to streamline finances by replacing existing debt with terms that are more favorable. PGW President & CEO Seth Shapiro highlighted the stride in their financial position stating, "The performance of PGW’s leadership team has continued to advance our rating. We are constantly improving operational excellence and growing revenue," as reported by the City of Philadelphia's official announcement.
Jamie Dunn, City Treasurer expressed satisfaction with the strong investor turnout, which came during a particularly busy week for bond issuances, "This demand is a testament to PGW’s sound financial management and the strength of its credit,” she said in the same press release. The all-in true interest cost for the bonds is roughly 4.14 percent, and the credit spreads were notably tighter than PGW's previous bond issuance in 2020, showing marked financial progress. Despite the heavy competition for investors' attention, the strength of PGW's credit enticed a robust level of investor participation. The bonds officially closed on Wednesday, September 18.
Underwriting the bond sale was a syndicate led by JP Morgan Securities LLC, with Ramirez & Co. in the role of co-senior manager. PFM Financial Advisors LLC and Phoenix Capital Partners, LLP provided financial advisory services for the transaction. All the rating agencies considered not only PGW’s strong financial performance but also the experienced management team's track record, improvement in collection ratios, and solid coverage of fixed costs, further cementing the utility's standing in the financial market.
