City of Lubbock
Successful execution in a volatile market driven by strong investor demand
Background
The City of Lubbock operates a combined water and wastewater utility system supported by user revenues and responsible for funding ongoing capital improvements to maintain service levels and support long-term growth.
In 2026, the City accessed the capital markets to fund system improvements and refund outstanding debt for savings as part of its broader strategy to proactively manage infrastructure and long-term financial performance.
Opportunity
The bonds came to market during a period of significant volatility, including a sharp move in the municipal benchmark (AAA MMD) immediately prior to pricing that created uncertainty around investor demand and execution.
The City’s water and wastewater system maintains a strong credit profile, with AA/Aa+ ratings reflecting its essential-service nature, stable revenue stream, and solid financial position. These strengths supported continued investor demand for high-quality municipal credits even amid broader rate volatility.
With conditions rapidly evolving, successful execution depended on the financing team carefully timing market entry and remaining flexible as investor sentiment shifted.
Solution
As senior managing underwriter, Baird led a negotiated approach focused on flexibility, investor engagement, and disciplined execution. Working closely with the financing team, Baird monitored market conditions and maintained active dialogue with investors to gauge demand and pricing.
Baird emphasized the system’s credit strengths to build investor confidence while preserving flexibility around timing and pricing to respond quickly to changing market conditions.
Implementation
Market conditions improved on the morning of pricing, allowing the financing team to proceed with the transaction. The deal was met with strong demand from 36 unique institutional investors, with order books ranging from approximately 3.1x to more than 7x subscribed, particularly in mid- and long-term maturities.
This demand enabled repricing, with yields tightened by 1 to 7 basis points across the curve. Final yields for premium bonds ranged from approximately 2.56% in 2027 to 4.25% in 2044. Serial maturities due in 2045 and 2046 were structured with discounts to yield 4.58% and 4.62%, respectively.
Results & Impact
The City successfully executed its financing despite challenging market conditions. Strong investor demand and effective timing resulted in favorable pricing and reduced borrowing costs.
The transaction funded critical water and wastewater infrastructure while generating debt service savings through the refunding component. It also reinforced investor confidence in high-quality essential-service credits.
Baird’s leadership helped guide the financing team through market volatility and achieve a successful outcome.