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Deal of the Year Goes to Michigan Finance Authority

DEC 5, 2012 10:30pm ET
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NEW YORK — The Michigan Finance Authority won The Bond Buyer’s 11th annual Deal of the Year award Wednesday night for its multi-billion refinancing of Michigan’s federal unemployment insurance loan.

“This was a transaction that was big, precedent setting and AAA all around. It provided a template for subsequent deals, a low cost of capital and benefits for both the public and private sectors,” said Gavin Murphy, editor in chief of The Bond Buyer, who presented the award at a ceremony held at the Waldorf Astoria hotel in New York City.

Click here to see Deal of the Year Award pictures.

The transaction also won the Deal of the Year award for the Midwest region.

This year’s Freda Johnson Award honoring Trailblazing Women Issuers was given to Rhode Island General Treasurer Gina Raimondo. The award recognizes a woman affiliated with an issuer who has been a leader, innovator and mentor.

Raimondo championed passage of Rhode Island's pension overhaul bill. "Many people thought I was a little nuts," she said. "But I enjoyed every bit of it and we proved that seemingly intractable financial problems can be fixed."

The Michigan Finance Authority’s $3.3 billion of unemployment obligation assessment revenue bonds allowed the state to save millions of dollars in interest costs associated with a loan from the federal government for unemployment insurance benefits. It served as a model for subsequent transactions in the municipal bond market.

"Through creative financing, we were able to resolve our solvency immediately and return $1 billion to Michigan businesses. We're proud of that and our triple-A rating," said Steve Hilfinger, the authority's director of licensing and regulatory affairs.

The contest this year saw nominations that ranged from bonds issued to finance hospitals, housing, toll roads and airports to public-private partnerships and bonds sold for alternative energy projects.

The 2012 awards considered deals that closed between Oct. 1, 2011 and Sept. 30, 2012 and the contest drew some 90 nominations for transactions ranging in size from a few million to billions of dollars. One finalist was selected from each of the five regions covered by The Bond Buyer. One issue was recognized as winner in the small issuer category. Small deals are those completed by issuers with annual revenue of $70 million or less.

Non-profit and public health care transactions had their own category.

The entries were evaluated by The Bond Buyer’s editors and bureau chiefs who looked for innovation, ability to pull complex transactions together under challenging conditions, deals that could or did serve as a model for other financings, as well as for public purpose.

The Bond Buyer also selected the winner of its award for a nontraditional public finance transaction, a category that was open to deals that utilized financing techniques other than traditional municipal securities. The award, which was presented for the first time in 2006, reflects the growth of this innovative sector.

 

Regional winners were:

 

Northeast: The Massachusetts Water Pollution Abatement Trust’s $371 million of hybrid structure new money and refunding bonds.

 

Southwest: Midland County, Tex., Fresh Water Supply Dist. No. 1’s $196 million pipeline funding package.

 

Midwest: The Michigan Finance Authority’s multibillion dollar refinancing of the state’s federal unemployment insurance loan.

 

Southeast: Broward County, Fla.’s $622 million bond package for Ft. Lauderdale–Hollywood Airport.

 

Far West: The Sonoma-Marin Area Rail Transit District (SMART)’s $191 million of Measure Q Sales Tax Bonds.

 

The winner in the small issuer category is Roaring Fork Transportation Authority, Colo.’s $6.65 million of Qualified Energy Conservation Bonds.

 

The health care sector winner is the Dormitory Authority of the State of New York’s $750 million financing for Memorial Sloan-Kettering Cancer Center.

 

The winning nontraditional financing: Ohio State University’s 50 year concession of its parking system.

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Ohio State University took a department (Transportation and Parking) that did better than break-even, employing people who were paid a living wage and benefits, and replaced it with a vendor who makes their profit by paying people $8/hour and no benefits. Gee, I'd say this is a win-win. It's all about greed -- the folks that brokered this deal for OSU will all give themselves great big bonuses and never give a thought to those folks laboring for next to nothing. How can they live with no conscience?
Posted by Kathy R | Friday, December 07 2012 at 9:01AM ET
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A recent phenomenon is the emergence of bonds with shorter call protection as funding alternatives for municipalities. However, the shorter call protection also dampens the potential upside for investors, which in turn reduces the price they are willing to pay.

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