Benefits for Utilities
The CFSD concept has been proven in thirteen significant financings aggregating over $1.3 billion by major utility systems. All were closed on schedule and oversubscribed at market prices. These transactions involved 11 regional and 125 local banks.
The Benefits of Borrowing from Local and Regional Banks
Local banks are lending from their own customer deposits, not from complex, leveraged structures and the volatile wholesale markets maintained by global lenders and investors. The March 2020 coronavirus pandemic has caused these wholesale markets to seize up as they have done so several times in the past twenty years (Dot.com bubble and Lehman Brothers collapse.) Borrowing from local and regional banking institutions is also looked upon favorably by local political constituencies and the regulatory regime, as the subsequent re-lending of interest stimulates local job growth and economy. In essence, the local borrowing cycle benefits the entire community. CFSD financings may be presented to rating agencies as significant complementary support to clients’ traditional liquidity facilities.
Services provided by the CFSD team include:
- Initial screening of potential agent banks and assistance with the interviewing process.
- Subsequent development of the potential syndicate banking group through the use of a proprietary screening process to ensure participants have strong credit quality.
- Execution of the syndication.
- Assistance with public relations and communications as well as regulatory matters to ensure the utility achieves the full benefits of the transaction.
From Wall Street to Main Street
The service territory map below is from a recent CFSD financing. The blue dots show the headquarters office locations of the participating local and regional banks. This demonstrates CFSD’s ability to pinpoint local banking resources in great detail, thus helping utility clients use Main Street to complement their Wall Street liquidity facilities.
Utility Benefits Recap:
- Local/regional banks are more committed to local borrower interests that are investors in often distant money centers
- Local/Regional lending ideal to complement back-up facilities provided by money center banks.
- Increased market competition for financing and better terms as utilities can exert more influence in the pricing process than with money center banks.
- Political, community, and regulatory goodwill from “Main Street” borrowing, and the cycle of community reinvestment that follows.
- Positive publicity through local job creation from capex projects.