Devon (S5OILP) Energy Corp. will gain urban improvements around its new headquarters as the Oklahoma City Economic Development Trust sells $117.7 million in taxable bonds, with yield penalties on such debt touching record lows.
This week’s sale, the largest of its kind for Oklahoma since July 2010, also includes $25.9 million in tax-exempt securities. The offering will fund downtown improvements in the state’s capital around the 50-story building, including work on a botanical garden and conservatory and additions of a restaurant, band shell, performance lawn and dog park, according to bond documents.
Devon has about $7 billion of cash after divesting overseas and offshore assets to finance drilling in the U.S. and Canada, Chief Financial Officer Jeff Agosta said Feb. 20. The company completed its $835 million tower in October. As part of a redevelopment agreement, Devon must give the authority a minimum of $11.3 million annually for 21 years. The City Council will dip into its general fund for debt service if the payments fall short, said Standard & Poor’s, which rates the securities AA, third-highest.
Moody’s Investors Service also gave the deal its third- highest grade, Aa2. The city anticipates “a strong investor reception” because of the issue’s ratings and the city’s backstop, Kenton Tsoodle, assistant finance director, said in an e-mail.
Yield premiums on taxable debt hit a record low of 106 basis points over U.S. Treasury securities in the week of March 11, according to a note by Citigroup analysts led by George Friedlander, head of municipal research. Issuance of taxable bonds is on pace to reach $44 billion this year, compared with $32.6 billion in 2012, he said.
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