CHICAGO — Wisconsin’s first recovery zone facility bonds sold this week in a $30 million transaction that will help finance an expansion of Foremost Farms’ facilities, including a cheese manufacturing facility in Appleton and a whey processing plant in Marathon County.
The company is undertaking a $47 million expansion of its facilities. Proceeds will help finance the purchase and installation of equipment, and renovation, construction and other costs associated with the projects.
The city of Appleton was the issuer. The bonds, which mature in 2037, captured an interest rate of 0.31% in their first weekly marketing, according to bond counsel Kasson & Associates LLC.
Ahead of the sale, Fitch Ratings assigned a AA-minus and an F1-plus to the variable-rate bonds based on a direct-pay letter of credit from CoBank ACB that expires in 2012. W.R. Taylor & Co. is remarketing agent on the securities.
The LOC provides full and sufficient coverage of principal plus an amount equal to 45 days of interest at a maximum rate of 10% based on a year of 365 days and purchase price for tendered bonds while in the weekly rate mode, Fitch wrote.
The sale marks the state’s first under the recovery zone facility bond program created in the federal stimulus law. So far, a total of 18 recovery zone facility bonds have been sold nationally with a value of $293.4 million, according to Thomson Reuters. Wisconsin received a total authorization $238 million to be divided among its local governments. Foremost Farms tapped into allocations from the state, Marathon County, and Outagamie County.
The $15 billion program provides the issuer with authority to grant a tax exemption to private-activity bonds without dipping into a state’s share of volume cap to support qualified projects in recovery zones that meet standards tied to significant poverty, unemployment, home foreclosures, or general distress, or an area that was previously designated an empowerment zone.
The businesses that receive an allocation must also meet federal qualifications. Businesses that operate a commercial or private golf course, massage parlors, suntan facilities, and racetracks are examples of businesses that cannot participate in the program. The deadline for issuance is January 2011.
Appleton a strong supporter of the project, which is expected to create more than 30 jobs and boost city revenues.
“They are a big local employer and they have a good relationship with the city, so we definitely wanted to work with them on this project,” said city finance director Lisa Remiker. “The bond program will help keep their costs lower for construction.”
Gov. Jim Doyle signed legislation earlier this year that returned any unused local allocation into a statewide pool administered by the Department of Commerce. Doyle last week announced a $45 million allocation for Energy Composites Inc.’s new clean-energy manufacturing plant in Wisconsin Rapids that is expected to create 600 jobs.
The company, established in 1992, provides composites-based solutions to the clean-energy industry. Proceeds of the bond sale will help finance construction of a 535,000-square-foot plant on a 94-acre campus that will manufacture wind blades, the first production facility of its kind in the country.
In a company statement, president Jamie Mancl said: “This lowers our cost of borrowing and makes it more attractive for our lenders to provide us with the debt portion of the financing package for the new program.”