Michigan Gov. Rick Snyder last week signed into law a measure that will allow Highland Park to refinance and provide additional security for its outstanding financial recovery bonds.

The city, which is under emergency management, issued $28 million of deficit bonds in 2008 to fund pension obligations. Officials want to refinance the bonds to escape the increasingly expensive process of securing letters of credit.

The new law will allow the city to provide additional security for the debt by hiring a third party to collect and set aside revenue used to pay the bonds, carving out the property taxes and state aid pledged to them and sending the funds directly to a bond trustee.

If Highland Park refunds its debt with the lockbox feature, it would be the third time a Michigan issuer has used that structure to enter the market. Detroit first used it when it issued fiscal stabilization bonds in 2010. So far, HB 4716 would apply only to Highland Park and Ecorse, the only two municipalities with outstanding financial recovery bonds.

The emergency management loan board and the Michigan Finance Authority still need to approve the deal.

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