CHICAGO — Wisconsin yesterday priced $131 million of new-money and refunding clean-water revenue bonds, the first in a series of three state deals over the next month, including a restructuring of more than $200 million of general obligation bonds for budget savings this year.
Morgan Stanley was senior manager and MR Beal & Co. was co-senior manager. Acacia Financial Group was financial adviser. Foley & Lardner LLP was bond counsel.
The deal sold in three series, comprising $70 million of tax-exempt bonds, $14 million of refunding bonds, and $47 million of taxable Build America Bonds.
The tax-exempt piece carried serial maturities from 2012 through 2016 and from 2027 to 2031. The BABs mature between 2017 and 2026, according to state capital finance director Frank Hoadley.
“The structure was based on a maturity-by-maturity review” of the interest costs of tax-exempt verse BABs, he said.
Complete pricing information was unavailable yesterday afternoon.
Ahead of the clean water sale, all three rating agencies affirmed the program’s credit. Fitch Ratings and Standard & Poor’s rate the new bonds and $800 million of outstanding clean water revolving fund bonds AA-plus, while Moody’s Investors Service rates them an equivalent Aa1.
Fitch attributed the strong rating to the clean water fund program’s strong reserve levels combined with Wisconsin’s substantial financial commitment, which enable the program’s cash flow to withstand significant loan repayment defaults without causing a default on the bonds.
The credit also benefits from the ability to direct less creditworthy borrowers to loan pools not pledged to bond payment and its tested ability to intercept state aid payments of delinquent borrowers.
The program’s debt-service reserve stands at $107 million, covering 13.3% of outstanding bond principal.
The program’s strengths are offset slightly by exposure to Wisconsin’s credit because of the state’s commitment to fund subsidy payments that make up a portion of the program’s principal and interest.
“This prevents the rating on CWF revenue bonds from being completely insulated from the credit of the state’s GO bonds,” Fitch said.
More than 200 local borrowers participate in the program. The pool’s 10 largest borrowers represent 67% of the portfolio. The largest is the Milwaukee Metropolitan Sewerage District.
The state, as soon as next Tuesday, will enter the market with more than $200 million of refunding GOs in a long-planned restructuring that will push off maturities coming due this year, reducing the burden on the state’s general fund.
“No maturity will go beyond the final maturity in the original debt service schedule,” Hoadley said.
The $61.8 billion budget for fiscal 2010-11 signed into law last year by Gov. Jim Doyle relied on the restructuring of a total of $285 million of debt along with a mix of federal stimulus funds, spending cuts, and tax and fee increases to wipe out a $6.6 billion deficit.
Wisconsin last summer restructured some GO debt and petroleum inspection fee revenue bonds as part of the plan.
Bank of America Merrill Lynch is the senior manager on the upcoming restructuring.
The state also plans a competitive sale of at least $100 million of new-money GOs in the next month, Hoadley said.
Wisconsin’s GOs are rated AA by Standard & Poor’s, AA-minus by Fitch, and Aa3 with a negative outlook by Moody’s.
The state is facing a $219 million deficit in its current budget due to lower-than-expected revenue and the cancellation of a tax reciprocity agreement with Minnesota, according to the legislative fiscal bureau.
