The Ohio Water Development Authority sold $300 million in bonds to raise money for upgrades to the state’s water infrastructure.
The bonds mature between 2027 and 2033, yielding between 2.82% and 2.98%. They pay interest at 5%. The securities received a rating of Aaa from Moody’s Investors Service and AAA from S&P Global Ratings.
“The Aaa rating largely reflects the strong security provided by the size, diversity and credit quality of the combined WPCLF and DWAF loan pools (the “loan pool”), the very high loan default tolerance, the successful track record of program management and oversight, and the presence of favorable structural features such as the cross-collateralization between the WPCLF and the DWAF,” Moody’s analysts wrote, referring to the Water Pollution Control Loan Fund and Drinking Water Assistance Fund.
The WPCLF and DWAF are Ohio state programs that finance improvements to water quality. Through the WPCLF, the authority will loan the bond proceeds to municipalities in Ohio to fund those improvements.
Last week, the Environmental Protection Agency (EPA) proposed a rule that would require water service systems to replace lead service lines within the next decade. Lead exposure can cause several harmful health effects, especially in young children.
The rule could require major changes in Ohio, which has the third-most lead pipes in the country, according to the EPA. Cities with a lot of lead water pipes, such as Cleveland, could receive an extended timeline for replacement, which is estimated to cost billions of dollars.
The bonds are limited obligations of the authority, payable by borrower loan repayments, including interest payments.
Citigroup Global Markets Inc served as lead underwriter on the issuance, purchasing the bonds for $346 million. The price reflected a premium of $47.3 million and a discount of $1.2 million. PFM Financial Advisors LLC served as financial advisor.