Massachusetts School Authority Plans $725M Refunding

he Massachusetts School Building Authority expects to sell $725 million of senior dedicated sales tax refunding bonds through negotiation on Thursday, after a one-day retail order period.

Jefferies & Co. is the lead manager for the Series 2012B bonds, which will refund a portion of Series 2005A bonds and mature from 2017 to 2030.

Fitch Ratings rates the bonds AA-plus, while Moody's Investors Service assigns its Aa1 rating, both with stable outlooks. The agencies assigned the same rating to the authority's $5 billion in senior bonds. Fitch and Moody's rate a $293 million subordinate lien AA and Aa2, respectively.

A first lien on a 1-cent pledge of the state's 6.25-cent sales tax receipts secures the senior bonds.

"The lower rating on the subordinated bonds reflects the junior pledge to the senior bonds and the difference in the additional bonds test protections on the two liens," Fitch wrote in a report. Additional issuance, according to Fitch, requires 1.4 times maximum annual debt service coverage for the senior bonds, compared with 1.3 times aggregate coverage for the subordinated bonds.

Moody's said its stable outlook "incorporates our expectation that this revenue stream will continue to perform well over the long term."

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC is bond counsel. Greenberg Traurig LLP is disclosure counsel and Nixon Peabody LLP is representing the 19 underwriters involved with the deal. Jefferies is lead manager, according to Thomson Reuters.

The authority, which in 2004 replaced the former school building assistance program that the Department of Education administered, has made nearly $10 billion in reimbursements to cities, towns, and regional school districts for school construction projects.

On Wednesday, state Treasurer Steven Grossman appointed Greg Sullivan, the state's inspector general for 10 years, to the authority's board of directors. Sullivan will succeed Lisa Turnbaugh, who will remain as an advisor to the board and to the authority's professional staff.

Sullivan is one of four treasurer-appointed board members. Grossman also reappointed Richard Bertman, Terry Kwan and Mary Grassa O'Neill to two-year terms.

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Massachusetts
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