Michigan's Special Revenue Bonds Receive Triple A's
June 1, 2012
Wall Street Agencies Recognize Unemployment Obligation Assessment Security with Highest Possible Ratings
Moody's Investors Service, Standard & Poor's Ratings Services, and Fitch Ratings have awarded the Michigan Finance Authority's Unemployment Obligation Assessment Revenue Bonds ratings of Aaa, AAA, and AAA, respectively, the highest long-term rating available from each service.
In making their announcements the agencies cited the recent stabilization and growth of Michigan's economy as well as the diversity of its employers, as key strengths of the bonds. The agencies also noted the inherent strength of the underlying statutory provisions.
"This is terrific news, and yet another sign that the hard work of reinventing Michigan continues," said Gov. Rick Snyder. "Over the last 18 months we have shown relentless positive action in fixing our structural deficit, paying down long-term obligations, and returning our state to fiscal integrity. These ratings are proof positive that Wall Street believes we are laying a solid financial foundation for Michigan's future."
Proceeds from the $2.9 billion issue will be used to refund the MFA's 2011 Unemployment Obligation Assessment Variable Rate Demand Revenue Bonds, which repaid the Michigan Unemployment Trust Fund's balance due to the Federal Government. Pricing on the bonds is scheduled to occur the week of June 11.
To date, the 2011 bonds have saved Michigan employers more than $38 million in reduced interest expenses. In addition, FUTA tax credits will be fully restored, future tax penalties have been avoided, and the solvency tax on Michigan employers has been eliminated.
The majority of the 2012 bonds will lock in historically low fixed interest rates for the life of the issue, reducing the risk of increasing interest rates associated with the variable rate bonds, which are expected to be fully repaid by the end of 2014. The lower costs will then mean lower assessments for Michigan employers.
"The top ratings given to this transaction affirm the rating agencies collective confidence in Michigan's economic recovery," said State Treasurer Andy Dillon. "They also show clear support for the current and future health of our employers."
"These transactions have not only allowed the State to eliminate a substantial debt to the federal government, but also restored solvency to the unemployment trust fund and mitigated penalties and other burdens on Michigan's job providers," said Steven H. Hilfinger, director of the Department of Licensing and Regulatory Affairs.
The foregoing does not constitute an offer to sell or the solicitation of an offer to buy the 2012 bonds. Potential investors should review the official statement for the 2012 bonds prior to making any purchase.