DALLAS — The Michigan Finance Authority prices $300 million new money and refunding under its clean water revenue bond program Wednesday.

S&P Global Ratings and Fitch Ratings both rate the bonds AAA. The outlook is stable.

The sale will generate about $125 million in new money to fund loans and the rest will take out anticipation notes issued this year and debt from 2009 and 2010. Refunding savings are estimated at $19.5 million.

PNC Capital Markets LLC is bookrunning senior manager and Bank Of America Merrill Lynch is co-senior manager.

"We view the program's enterprise risk profile as extremely strong," S&P said. "This is due to a combination of the low industry risk profile for municipal pools, and our view of the program's market position, which we consider extremely strong."

MFA, which manages the state revolving fund program, has nearly 30 years of successful management under its belt, during which no underlying obligation has ever defaulted.

The MFA receives support from multiple levels of government, including federal capitalization grants and state matching funds. The authority also coordinates and prioritizes projects with help from the Department of Environmental Quality.

Security on the bonds is provided primarily through loan revenue repayments. The state provides loans to municipalities to finance water- and wastewater-related projects at low interest rates. Debt service payments on the bonds are made from leveraged loan repayments and investment earnings from the loan and reserve funds.

After this week's sale is completed, the authority will have $1.3 billion in existing state revolving fund bonds outstanding under the clean water program all in a fixed rate structure.

The MFA has an additional $128 million of drinking water bonds outstanding.

S&P noted that the cross collateralization between the clean water state revolving funds and the drinking water state revolving funds provides additional security and portfolio diversity.

The authority's state revolving fund balance sheet is significantly over collateralized with $1.3 billion in surplus pledged debt obligation and reserve.

Both programs are capitalized through federal EPA grants and require a 20% match from the state.

The authority manages it debt portfolio for market opportunities effectuating several refunding transactions since 2010 to achieve net present value saving in excess of $151.9 million. Savings are recycled back into program assets to provide additional program capacity and bondholder security.

"The MFA maintains these large reserves to generate earnings for the desired loan interest rate subsidy, and to remain in compliance with minimum reserve requirements for its various bond classes," S&P stated.

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