PHILADELPHIA — The Philadelphia Gas Works (PGW) and City of Philadelphia successfully priced $213 million of Gas Works Revenue Refunding Bonds 18th Series, achieving $13.1 million in net present value savings. In advance of the sale, PGW earned a ratings upgrade from S&P Global Ratings and an improved rating outlook from Moody’s Ratings, reflecting PGW’s strong and improving financial profile. After achieving their second upgrade in three years, PGW’s bonds now have their highest combination of ratings on record.
The $213 million bond deal refunded two series of outstanding bonds through different refunding techniques to achieve a combined net present value savings of $13.1 million, or 5.82 percent of refunded par. Approximately $138 million of outstanding 14th Series Bonds were refinanced through a current refunding, achieving $7.6 million in net present value savings (5.53 percent of refunded par). In addition, $87 million of outstanding 15th Series Bonds were refunded through a tender, achieving an additional $5.5 million in net present value savings (6.28 percent of refunded par).
Through the tender offering, the City bought back a select amount of outstanding PGW bonds from bondholders that met the City’s savings criteria and issued lower-cost debt to fund the purchase value. The City initially offered approximately $218 million in bonds for tender and received offers for over $115 million, a participation rate of 53 percent. Ultimately, the City accepted offers on nearly $87 million of bonds that generated savings that met its criteria.
“PGW is always looking for ways to reduce the cost of energy for our customers. One way to do that is to reduce our cost of borrowing,” said Seth Shapiro, President and CEO of Philadelphia Gas Works. “Both the rating agency upgrade and the broad investor interest provided recognition of our solid financial performance and sound management. We are pleased that PGW and the City were able to take advantage of that performance to benefit our customers.”
The transaction attracted broad investor interest, with 33 different investors placing orders that equaled more than 3.3 times the amount of bonds being sold. This exceptional demand allowed PGW to further lower interest rates by as much as seven basis points (0.07 percent) per maturity, increasing savings by over $500 thousand compared to initial estimates.
The transaction’s final combined all-in true interest cost is approximately 3.76 percent. Credit spreads were approximately nine basis points better on average than those PGW achieved in its last bond issuance in 2024 compared to the industry’s Municipal Market Data (MMD) benchmark for tax-exempt bonds.
“We were pleased that PGW received such a strong reception from investors, and the upgraded bond ratings are a testament to the continued hard work of the PGW management team,” said Jackie Dunn, City Treasurer.
Ahead of the sale, S&P upgraded its rating on Philadelphia’s Gas Works Revenue Bonds from ‘A’ to ‘A+’, citing strong financial coverage and the significant progress of PGW’s cast iron replacement program. At the same time, Moody’s improved its outlook on the Bonds from Stable to Positive while maintaining a rating of ‘A3’. Fitch Ratings maintained a Stable outlook on its ‘A’ rating of the Bonds, following their upgrade in 2025. All three rating agencies cited PGW’s strong financial performance, noting its seasoned management team, continued progress on its collection ratios, and strong coverage of fixed costs.
The 18th Series bonds were sold by an underwriting syndicate led by Jefferies, with Loop Capital Markets as co-senior manager. PFM Financial Advisors LLC and Phoenix Capital Partners, LLP served as municipal advisors on the transaction. The bonds closed on September 3, 2026.