Mass. Water Plans $289M Sale

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The Massachusetts Water Resources Authority plans to come to market this week with roughly $289 million of fixed-rate, tax-exempt Series 2013A general revenue refunding bonds.

Massachusetts Water has scheduled a retail order period for Tuesday with institutional pricing the following day, although a press officer for the authority said late Monday that depending upon retail results, it may advance institutional pricing to Tuesday.

Jefferies & Co. is lead manager. Public Financial Management Inc. is the financial advisor.

Standard & Poor’s and Fitch Ratings assign AA-plus ratings to the bonds, while Moody’s Investors Service rates them Aa1. All assign stable outlooks.

Roughly three-quarters of the proceeds will refund maturities on the authority’s senior lien fixed-rate bonds, Series 2005A and B, 2006A and B, 2007A and 2009B. Most of the balance will refund the outstanding amount of the authority’s 2002D subordinate variable rate bonds, with a smaller amount to refund the 2017 maturity of the authority’s 2008F subordinate variable rate bonds.

An authority press officer expects the bonds to result in present-value savings of $12.8 million, or 7.2%. No swaps or insurance are involved. The proposed structure, which the authority said could change based on market conditions at pricing, includes both serial and term bonds. Under the current plan of finance, the bonds will carry a 10-year call.

The authority, which the state legislature established in 1984, has about $5.8 billion of debt overall. It serves about 2.6 million people overall and 61 communities, mostly in eastern Massachusetts.

Boston contributes roughly one-third of the authority’s revenue, and all three major credit agencies consider its links to the Boston Water and Sewer Commission and its credit strength a positive. Fitch and Standard & Poor’s rate Boston Water and Sewer AA-plus, while Moody’s assigns an Aa1 rating.

A first lien pledge of net system revenues of the authority and a cash-funded debt service reserve secure the bonds. Localities must pay the authority for services as a general obligation, and nonpayment is subject to a tested state-aid intercept, according to Fitch.

Standard & Poor’s called the authority’s swap portfolio low-risk, citing counterparty diversification. It also termed the capital improvement program manageable, given the size of the system. Fitch noted that the authority is transitioning from costly, court-mandated projects to “ongoing rehabilitation.”

The stable outlook, said Moody’s, reflects the authority’s “sound financial performance despite pressure to limit rate increases from its members, most of which are experiencing ongoing financial stress related to the weak economy.”

McCarter & English LLP is bond counsel. Greenberg Traurig LLP is disclosure counsel. Edwards Wildman Palmer LLP is representing the underwriters.

Last month, Gov. Deval Patrick swore in Boston Water and Sewer Commission acting executive director Henry Vitale to the authority’s 11-member board. Vitale, one of three Boston representatives to the board, was the commission’s chief financial officer and treasurer for 18 years.

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