A city in eastern Montana sold more than $144 million in bonds to refund a previous issuance.
The bonds, which were issued by the city of Forsyth, mature on July 1, 2028, and pay interest at a rate of 3.875%. They received a rating of A3 from Moody’s Investors Service and A- from Fitch Ratings.
Proceeds from the sale of the bonds will be loaned to Northwestern Corporation, a power utility company that services Montana, Nebraska and South Dakota.
For Northwestern Corporation, “Montana produces a substantial majority of earnings and cash flows, and accounted for 85% of utility margin in 2022,” according to Fitch.
The issuance comes as Montana officials mull over a proposal by Northwestern Corporation to raise residential electricity rates by 25%. The proposal also calls for a $14 million hike in natural gas base rates. Fitch said its rating assumes that the Montana Public Service Commission, which regulates the state’s utility companies, will adopt the proposed rate changes.
“Rejection of, or a meaningful unfavorable revision to the proposed settlement agreement could result in future adverse credit rating actions,” according to Fitch.
The bonds will consist of limited obligations on the city, backed by a pledge of payments made by Northwestern Corporation to the city. Forsyth is a town of under 2,000 in Rosebud County.
BofA Securities, Inc and KeyBanc Capital Markets Inc served as underwriters on the issuance.