Case Study

Southern California Public Power Authority

As part of our general financial advisory engagement, PFM assisted the Southern California Public Power Authority (SCPPA) in closing a refinancing for a portion of its Southern Transmission Project bonds. This refinancing resulted in present value debt service savings of $7.5 million and successfully dealt with the new IRS tax regulations regarding transmission assets. In this transaction, PFM led the structuring of the refinancing issue, the procurement of ratings and bond insurance, and the analytical effort to structure the bonds around the numerous tax considerations.

This transaction also was able to accomplish two noteworthy achievements. First, PFM along with the underwriter successfully convinced the rating agencies and bond insurers on the elimination of a debt service reserve fund. This structural feature afforded several million in additional cash flow savings to the participants, allowing them to more rapidly pay down their stranded costs. And second, the pricing for this negotiated issue achieved rates consistent with "AAA" general obligation rates. PFM led the pricing negotiations with Smith Barney on behalf of SCPPA and was able to achieve rates which were lower than comparable California insured bonds. This issue successfully closed in June 1998.