Beginning in 2008, Oakland-based East Bay Municipal Utility District (EBMUD) and Los Angeles-based Metropolitan Water District of Southern California (MWDSC) hired Saber Partners as a financial advisor for a very specific purpose arising from the 2008 credit crisis. The public water utilities in California jointly engaged Saber Partners LLC to advise them on their outstanding variable-rate debt and evaluate new ways to access the floating rate market building each company’s inherent credit strength.
The two large public utilities, which are rated AAA by Standard & Poor’s, were replacing liquidity agreements that supported more than $1 billion of variable-rate demand obligations. Saber assisted the utilities in finding solutions outside of the typical standby bond-purchase agreements and letters of credit that municipalities use to provide support these type of issues.
Saber brought solutions from the corporate market, specifically revolving credit agreements, to help the California water utilities support their floating rate debt. Saber negotiated with commercial banks and their counsel on the terms and conditions of a revolving credit agreement. It also assisted the company in presenting the program to the rating agencies. Saber subsequently worked with the utilities traditional financial advisors in creating the final program accepted by a commercial bank with a structure and fee arrangement similar to high-grade corporate entities.
With a revolving credit structure, these utilities can achieve greater financial flexibility in managing their debt, diversify liquidity sources (a prime problem identified by the credit crisis) and achieve the lowest cost of funds available in the market based on their credit.