Moody’s Investors Service last week called Menasha’s settlement with holders of its defaulted steam plant notes, and the sale-leaseback of its electric utility assets to help fund the agreement, “positive developments for the city’s credit profile.”
The city’s general obligation rating is at Ba1. The city lost its investment-grade rating due to the strain posed by its steam plant debt and its decision not to make good on its appropriation pledge to repay $24 million of notes tied to the utility.
“These recent events represent positive developments for the city’s credit profile, as the promise of a settlement lessens the potential for further investor litigation. We will continue to closely monitor developments and publish additional commentary as appropriate,” Moody’s wrote.
Another positive is the city’s use of state public lands trust fund loans to cover repayment of other obligations, including debt service on GOs issued for the plant. Moody’s had previously assigned a negative outlook to the Ba1 rating due to the burden posed by the looming payments.
Menasha last week received a $3.5 million loan to cover most of the costs of defeasing a portion of its utility debt and restructuring another piece as required under the $17.3 million asset sale-leaseback transaction with Wisconsin Public Power Inc. The city and WPPI closed on the transaction last week.
A group of investors sued after the city failed in 2009 to live up to its appropriation pledge to cover debt service on the $23 million of notes. They agreed to settle the case earlier this year for $17.5 million. Court approval is still pending.