Oklahoma City Gets Downtown Debt at Smallest Penalty: Muni Deals

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.

To contact the reporter on this story: Romy Varghese in Philadelphia at rvarghese8@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.