The Downtown Development Authority of Detroit, Michigan, issued $198.8 million in bonds to refund previously issued securities.
The bonds mature between 2025 and 2048, yielding between 3.36% and 3.95%. They pay interest at 5%. The securities received a rating of A from Kroll Bond Rating Agency and BBB+ from S&P Global Ratings.
“The rating reflects our opinion of the authority’s position within a citywide economy with outsized exposure to economic downturns,” S&P analyst John Sauter said in a press release.
Economic headwinds have hit Detroit particularly hard over the past fifty years. Its population has halved as manufacturers—once the anchor of the city’s economy—fled for cheaper factories overseas, and it now has the highest unemployment rate of any large U.S. city, according to the Bureau of Labor Statistics. The city itself declared bankruptcy in 2013 in what is still the largest municipal bankruptcy in American history.
Things have improved since then, boosted in part by the Detroit Downtown Development Authority. The authority will use the issuance proceeds to achieve interest-cost savings by refunding bonds that it sold in 2018. It will also use the proceeds to defease bonds that it sold in 1996, 1998, and 2018.
The Detroit Downtown Development Authority is a public instrumentality that aims to increase economic activity in the city’s downtown area. It is financed by a property tax on property owners within the area. The bonds are special, limited obligations of the authority, payable by those taxes.
Jefferies LLC served as lead underwriter on the issuance, purchasing the bonds for $212.6 million. The price reflected a premium of $14.9 million and a discount of $1.1 million. Masterson Advisors LLC acted as municipal advisor.