The Rhode Island Health and Educational Building Corp. sold a $15 million tax-exempt bond issue on behalf of East Providence for health projects and safety repairs at the distressed city’s public schools.
Moody’s Investors Service rated the Series 2012B bonds Aa3 with a negative outlook, based on the programmatic rating of the state school construction aid intercept enhancement program. The state’s general obligation bond rating is Aa2, the outlook also negative.
Raymond James Morgan Keegan bought the bonds on Sept. 20 at a true interest cost of 3.51%, according to a statement from Gov. Lincoln Chafee, who said the rate is significantly less than a rate based on the city’s current junk-level rating of Ba1. The deal will close Oct. 4, state revenue Director Rosemary Booth Gallogly said Wednesday.
Edwards Wildman Palmer LLP was bond counsel. Moses Afonso Ryan LLP represented the conduit issuer and Nixon Peabody LLP represented the underwriter.
“[The] timing of debt-service payments and state aid intercept ensure timely and sufficient payment,” Moody’s said in its report.
East Providence is under a budget review committee, each one step short of receivership under Rhode Island’s three-tiered intervention program for distressed communities.
Last year, Moody’s dropped its rating for the city six notches. In December, Standard & Poor’s dropped the city’s GO rating three notches, to BB-plus from BBB-plus.
Woonsocket is also under the same committee. Central Falls just exited bankruptcy, with a federal judge to certify its exit later this month.
Rhode Island in January advanced education aid to distressed local governments, with 49,000-population East Providence receiving $12.6 million.