Transaction Details

The City of Loudon

Municipal

Lead Bookrunner

Supporting Essential Water System Expansion Through a Successful Market Execution

Background
Baird served as Sole Managing Underwriter for The City of Loudon, Tennessee’s (the City) $21,205,000 Water and Sewer System Revenue Bonds, Series 2025 (the Bonds), which carried underlying ratings of A+ and were rated “AA” with bond insurance. The Bonds were issued to support upgrades to the community’s water and wastewater infrastructure. Loudon, located along the Tennessee River in eastern Tennessee approximately 30 miles southwest of Knoxville, operates its municipal utilities—water, wastewater, gas, and electric—through the Loudon Utilities Board, serving more than 6,300 active water customers and nearly 2,900 wastewater customers.

The Series 2025 Bonds finance a portion of the City’s long-term capital program, including the expansion of its water treatment plant from 14 million gallons per day (MGD) to 26 MGD. This investment will significantly increase capacity, support continued population and economic growth, and enhance long-term system reliability. In addition to the plant expansion, the financing advances other water and sewer system improvements and extensions identified in the City’s enterprise fund capital plan.

Opportunity
Conditions leading up to the sale created an attractive window to secure cost-effective, long-term financing for these essential projects. Investor outreach indicated healthy demand across the maturity spectrum, including notable insurer interest in long-dated par structures and consistent appetite from separately managed accounts. The combination of strong pre-marketing feedback and favorable market dynamics presented an opportunity to tailor the structure to investor preferences and enhance overall pricing through strategic use of bond insurance.

Implementation
On pricing day, investor engagement was strong and helped inform real-time structuring decisions. Reverse inquiries from insurance companies guided the approach in the longer maturities, where demand resulted in robust order books. In particular, the 2043 maturity generated orders approaching 4x subscription, allowing the City to reduce yields by four basis points and achieve more favorable pricing.

Intermediate maturities also drew steady interest from separately managed accounts, with most books building between 1-2x subscription.

In the early years of the scale, specifically 2028 and 2029, Baird identified that insured structures were generating stronger investor demand than the initially offered uninsured bonds. With approximately 30 minutes remaining in the order period, the team recommended shifting these maturities to insured structures. The adjustment immediately increased subscription levels to between 2-3.5x and allowed the City to finalize these maturities at improved pricing levels.

Results & Impact
The City achieved efficient financing that supports one of its most important infrastructure investments. Strong demand across the curve, combined with responsive structuring and targeted use of insurance, resulted in a well-distributed transaction with more favorable yields in key maturities. The Series 2025 Bonds position the City to advance the expansion of its water treatment plant and other essential system improvements that will enhance capacity, reliability, and long-term resilience.

Baird’s collaborative and flexible execution delivered an outcome aligned with the City’s financial objectives and long-term infrastructure strategy.