UPDATE 2-Michigan school districts to test municipal bond market
Aug 12 (Reuters) - After three municipal bond sales in Michigan were postponed in the wake of Detroit's bankruptcy filing, three of the state's school districts are testing the market with sales expected in the next two weeks.
The Michigan Finance Authority is planning to sell $92 million of state aid revenue notes for the Detroit School District during the week of Aug. 19, a market source familiar with the deal said on Monday
The authority is also issuing $18 million of revenue bonds for Ypsilanti Community Schools in Washtenaw County on Wednesday, another market source familiar with that deal said.
The sources were not authorized to speak publicly for the districts. The Ypsilanti district did not immediately respond to requests for comment.
J.P. Morgan Securities is the lead manager for both debt sales.
The school district in Sandusky, Michigan, a town about 90 miles north of Detroit in Michigan's "thumb," is also planning to refinance about $4.9 million of unlimited tax general obligation bonds in a competitive sale on Aug. 21, according to Stauder, Barch & Associates, the district's financial adviser.
But in the past two weeks, Saginaw County, Genesee County and the city of Battle Creek all said they were holding off on bond sales.
There have been no new bond sales from Michigan issuers in the U.S. municipal bond market for an amount greater than $7 million since Detroit filed for the largest municipal bankruptcy in U.S. history on July 18.
Though the counties and Battle Creek were able to hold off on selling their bonds, the school districts may not have that luxury, according to a Moody's Investors Service report.
Many Michigan school districts borrow money each year in August to cover expenses and payroll for the upcoming school year. Most borrow through the Michigan Finance Authority, but others seek private loans or bank letters of credit, Moody's said.
"If market trends lead banks to withdraw credit support, those school districts could be faced with immediate cash flow pressures," Moody's said.
Detroit's bankruptcy filing has caused tremors throughout the state because Kevyn Orr, the city's state-appointed emergency manager, has said he will treat some general obligation bond holders as unsecured creditors.
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