CHICAGO — The Michigan Finance Authority sold $300 million of bonds for Detroit's convention center Wednesday, seeing yields on the tax-exempt debt ranging from 2.73% on 10-year maturities to 3.44% on 20-year maturities.

The debt carried AA-minus ratings from Standard & Poor's and A-plus ratings from Fitch Ratings. Debt-service payments are backed by a hotel tax in the three-county region around the convention center, Cobo Center, as well as statewide liquor taxes and a state pledge of annual transfer from cigarette tax revenue.

The MFA issued the debt on behalf of the Detroit Regional Convention Facility Authority. The deal featured $271 million of tax-exempt bonds and $23 million of taxable debt.

On the tax-exempt piece, bonds maturing in 2024 with a 5% coupon yielded 2.73%, according to the pricing wire. That compares to a 2.61% yield on 10-year, single-A rated debt on the MMD scale and 2.02% yield on 10-year bonds for triple-A bonds on the MMD scale. Detroit bonds maturing in 2029 with a 5% coupon yielded 3.21% compared to 2.98% for similarly rated debt on the MMD scale and 2.38% for triple-A rated debt on the on the MMD scale. The Detroit debt maturing in 2039 yielded 3.64%, compared to 3.40% for single-A rated debt on the MMD scale and 2.86% for triple-A bonds.

On the taxable side, bonds maturing in 2021 yielded 3.03%; bonds maturing in 2028 yielded 4.07% and a 2039 maturity yielded 4.92%.

The taxable 2016 bonds yielded 0.812%, a 45 basis point spread to treasury, according to the Municipal Market Monitor.

JPMorgan was the senior book-running manager.

The Detroit Regional Convention Facility Authority, created in 2009 by state legislation, leased the troubled convention center, best known as Cobo Hall, from the city for 30 years after years of declining performance and threats from auto makers to pull out of the show.

The new financing is driven by a November 2014 deadline in the 2011 financing. At that point, interest rates on the privately placed debt would spike to 7%.

 

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