Michigan Finance Authority Successfully Sells Bonds on Behalf of the Public Lighting Authority

June 25, 2014

Michigan Finance Authority Successfully Sells Bonds on Behalf of the Public Lighting Authority 

Permanent Financing Allows for Completion of Street Lighting Project in the City of Detroit

The Michigan Finance Authority (MFA) Wednesday sold $185 million in bonds on behalf of the Public Lighting Authority (PLA) through its Local Government Loan Program to complete the funding necessary to relight the streets of Detroit.

The long-term, fixed rate financing refunded the $60 million interim financing sold in December 2013 and provides additional funds for the completion of the street lighting project.  The issuance received strong investment grade ratings of “A-“from Standard and Poor’s and “BBB+” from Fitch.  Both agencies highlighted the legal and statutory strengths of the transaction.

“Lighting is an essential component to revitalizing Detroit,” said Governor Rick Snyder.  “Not only is it important to public safety, but it is a demonstration of the real improvements happening in the City every day.”

The interim financing has allowed for the construction of 9,000 new street lights to date.  The remaining 55,000 will be funded from this issuance.

“As anticipated, investors did their homework and demonstrated an appreciation for the credit strength of our deal,” said Odis Jones, Chief Executive Officer of the PLA.  “Every week we are adding 500 state of the art, LED lights throughout the City.  As a result the new system will be far more reliable and energy efficient than what was here before.  We are investing in the latest technology to ensure the system is built to last for our citizens.”

Investor demand was robust across the transaction, which was 2.5 times oversubscribed, allowing yields to be lowered during the pricing process.  35 separate institutions and several dozen individual retail accounts placed orders for the bonds, resulting in an all-in interest cost of 4.53% for the 30-year transaction.

“This project has been a priority for the state, and the MFA was proud to have assisted the PLA to reach its financing goals,” said Joseph Fielek, Executive director of the MFA.  “It was important to us to find a long-term solution at a low cost, and we have achieved those objectives.  It highlights the ability of communities to finance essential projects during financially challenging times if a bond issuance is well structured.”

The MFA offers effective low-cost financing to public and private agencies providing essential services to the citizens of Michigan, including municipalities, healthcare providers, public, private, and charter schools,higher education and loans to college students.

Citibank served as the senior manager on the transaction and BMO and Loop Capital were co-managers.  Dickinson Wright served as Bond Counsel to the MFA and Miller Canfield served as Bond Counsel to the PLA.  Robert W. Baird & Co. served as the Municipal Advisor.

 

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