June 25 A sale of $185 million of revenue bonds on Wednesday for Detroit's public lighting authority had no problem finding buyers despite the fact the city remains in bankruptcy court.
The bond issue, which was sold through the Michigan Finance Authority, was 2.5 times oversubscribed, receiving 35 institutional orders and several dozen more from retail accounts, according to a statement from Michigan officials.
The overall interest cost for the bonds, which carried serial maturities from 2015 through 2034 and term due dates in 2039 and 2044, was 4.53 percent.
"As anticipated, investors did their homework and demonstrated an appreciation for the credit strength of our deal," said Odis Jones, the lighting authority's chief executive officer, in the statement.
Domenic Vonella, managing analyst at Municipal Market Data, a unit of Thomson Reuters, said demand was strongest for bonds due within 10 years.
"Demand on this credit 10 years and shorter might also directly be related to the utility debt service structure and its exclusion from any Detroit debt restructuring," he said.
Ahead of the pricing, credit rating agencies said the tax revenue earmarked for bond payments will not become embroiled in the city's bankruptcy case under a federal court order. The bonds received investment grade ratings of A-minus from Standard & Poor's Ratings Services and BBB-plus from Fitch Ratings.
The bonds, which were priced through Citigroup, are secured by a first lien on Detroit's 5 percent tax on electric, gas and local telephone utility services.
Proceeds from the deal, which marked the first public offering of debt to repair Detroit's dilapidated public lighting, will be used in part to take out $60 million of floating rate bonds the city privately placed with Citibank in December to jump-start improvements to the system.
(Reporting by Karen Pierog; Editing by Dan Grebler)