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TVA’s 50-Year Bond Offering Carries Record-Low Interest Rate

September 30, 2015 By Cheryl Kaften

The Tennessee Valley Authority (TVA) announced on September 22 that it had priced $1 billion of new 50-year global power bonds carrying a record-low interest rate of 4.25 percent.

The bonds priced at a yield of 4.383 percent, which now stands as the lowest on record for a 50-year bond by any corporate or government agency issuer, according to the TVA. Investor demand for high quality, long-term fixed-income investments, along with the persistently low interest rate environment, contributed to the success of the offering, the authority said.

“TVA had a chance to secure low-cost financing for an extended period, with interest rates still hovering near all-time lows,” said TVA CFO John Thomas. “Meeting the demand for yield and duration that 50-year bonds provide to investors, while locking in savings for TVA, made this a mutually beneficial opportunity.”

More than $1 trillion of investment grade fixed-income securities have been issued so far this year, less than 1 percent of which had a final maturity of 50 years or longer. TVA’s 50-year bond offering drew demand from money managers, insurance companies and a variety of other investors. Bank of America Merrill Lynch, BNP Paribas, Morgan Stanley, and TD Securities were joint book-running managers for the transaction.

The new 50-year bonds will mature on Sept. 15, 2065, and are not subject to redemption prior to that time. Interest will be paid semi-annually, each year on March 15 and September 15. Application is expected to be made to list the bonds on the New York Stock Exchange.

The bonds will be issued, maintained and transferred through the book-entry system of the Federal Reserve Banks. Transactions may be cleared and settled by international participants through Clearstream and Euroclear. The bonds can be identified by the CUSIP number 880591ES7.

“This financing will help TVA provide low cost, reliable power, support economic development, and meet our stewardship obligations for decades to come, just as we have for the past 82 years,” commented the utility’s Treasurer Tammy Wilson.

The Tennessee Valley Authority provides electricity for business customers and local power companies serving 9 million people in parts of seven southeastern states. TVA receives no funding from taxpayers, and pays its own way with revenues from power sales and power program financings. The proceeds from the sale will be used to refinance existing debt or for other power system purposes.

Application is expected to been made to list the bonds on the New York Stock Exchange (NYSE). The bonds also will be issued, maintained and transferred through the book-entry system of the Federal Reserve Banks. The bonds can be identified by the CUSIP number 880591ER9.

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