CHICAGO — With a pledge by Michigan backing up the debt, below-investment-grade Detroit yesterday captured interest rates ranging from 2.47% to 5.375% on $250 million of distributable state aid limited-tax general obligation bonds.

The city will pay 4.25% on debt with 10-year maturities and 5.35% on 25-year maturities, according to pricing information yesterday.

The bonds carry Michigan’s pledge of revenue aid, which the state treasurer will deposit directly into the bond trustee’s account. The debt is rated A1 by Moody’s Investors Service and AA-minus by Standard & Poor’s.

Yields on the bonds range from 2.42% on 2014 maturity with a 5% coupon to 5.35% on a 2035 maturity with a 5.25% coupon.

Detroit received strong interest from buyers and helped keep the yields down, but it paid a penalty over similarly rated credits. A $23.1 million 2023 term bond, added at a repricing yesterday afternoon, priced to yield 4.80% with a 4.50% coupon, which was 168 basis points over the triple-A Municipal Market Data scale for that maturity yesterday, or 98 basis points over MMD’s A scale, according to Thomson Reuters.

A 2030 maturity of $75.15 million captured an interest rate of 5.125%. The debt features an optional call in November 2020 at par.

“If you are the issuer and you look at the interest rate you’ve borrowed at today, you have to be quite pleased relative to your financial position,” said Michael Pietronico, chief executive officer of Miller Tabak Asset Management.

“By virtue of the fact that the state of Michigan stood behind the city, in terms of debt service, the interest rate on this loan dropped dramatically,” he added.

Despite the lack of up-to-date financial audits in bond documents — the city’s latest financial audit covers fiscal 2008 — Pietronico said most investors knew what they were buying.

“Most institutional investors are used to that — other issuers are chronically late with their disclosures,” he said. “In the case of Detroit, you’d have to be under a rock not to know they have significant financial difficulty.”

Goldman, Sachs & Co. was the lead manager on the deal. Robert W. Baird & Co. is Detroit’s financial adviser.

City officials worked with Michigan legislators and state Treasury officials to craft a borrowing that would attract investors despite Detroit’s junk-level credit ratings. Mayor Dave Bing said he will use the proceeds from the issue to erase much of the city’s accumulated deficit.

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