The Michigan Department of Transportation sold $1.19 billion in bonds to finance transportation projects in the state.
The bonds mature between 2024 and 2049, yielding between 3.05% and 4.34%. They received a rating of Aa2 from Moody’s Investors Service and AA+ from S&P Global Ratings.
The “bonds benefit from strong coverage of debt service by pledged funds set aside by the state, even after accounting for the forthcoming increase in debt,” according to Moody’s.
The bond proceeds will finance the Rebuilding Michigan program, a state initiative which is focused on repairing highways and bridges that are “critical to the state’s economy,” according to the plan’s website. Unveiled by Governor Gretchen Whitmer in 2020, the program authorized the Michigan Department of Transportation to sell $3.5 billion in bonds to finance road and infrastructure projects through 2024. This week’s bond issuance exhausts the remainder of the authorization.
The bond sale follows a series of initiatives aimed at increasing transportation funding in Michigan. The state’s budget for this fiscal year raised the Department of Transportation’s funding to $6 billion from $5.4 billion, and the bipartisan infrastructure law passed in 2021 provides almost $8 billion in disbursements for Michigan highways and bridges over the next five years.
The issuance follows months of delays. The department originally announced plans to tap the bond market last November, but delayed the issuance citing “project cost changes and other pressures.”
Wells Fargo Securities and J.P. Morgan Securities LLC served as lead underwriters on the issuance, purchasing the bonds for $1.3 billion. The price reflected a premium of $107 million.