The Massachusetts School Building Authority on Wednesday will sell $142.4 million of qualified school construction bonds through negotiation.
The federally taxable subordinated sales-tax Series 2011A bonds will finance renovations to make school buildings energy efficient under a green repair program, according to an agency spokesman. The bonds are secured by a 1-cent pledge from the 6.25-cent Massachusetts sales tax after payment of the MSBA’s senior-lien dedicated tax bonds.
No insurance, swaps or refinancing is involved. The noncallable bonds will mature from 2012 through 2028.
Moody’s Investors Service has assigned the subordinated bonds a Aa2 rating. Fitch Ratings and Standard & Poor’s have assigned an equivalent AA.
“Bondholders benefit from structural protections, including the statutory dedication of the tax for school capital purposes,” Fitch wrote in a report.
“Dedicated revenues are segregated from the commonwealth general fund, and the authority has no role in funding school operations. Strong legal covenants protect against diversion of revenues or lowering of the tax rate, although the base can be changed.”
Citing a credit challenge, Moody’s warned that the recession and anemic recovery has pressured sales-tax collections, which fell by 6.2% and 1.3% in fiscal 2009 and fiscal 2010, respectively.
JPMorgan is leading an underwriting team that includes Barclays Capital, Jefferies & Co., Citigroup, Bank of America Merrill Lynch, Ramirez & Co., Morgan Stanley, Janney Montgomery Scott and Raymond James & Associates Inc.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC is bond counsel. Edwards Angell Palmer & Dodge LLP is disclosure counsel and Nixon Peabody LLP is counsel for the underwriters.
The qualified school construction bonds program began in 2009 as part of the American Recovery and Reinvestment Act, which authorized $22 billion of debt to be issued during 2009 and 2010. Some issuers are still selling their unused allocated amounts of bonds.
Legislation that has been filed by Sen. John Rockefeller, D-W. Va., and Rep. Charles Rangel, D-N.Y., would extend the program.
The Boston-based MSBA began in 2004, replacing a program that amassed $5.5 billion in debt.
The authority has made more than $7.5 billion in reimbursements to local and regional districts for school construction projects.
The authority conducts needs surveys of public elementary and secondary schools, its last coming in April. The survey assesses school districts’ needs on building systems conditions, general physical environment and the use of space.