Oakland County to move ahead with bond sale; other Michigan municipalities not so lucky
Oakland County is going ahead with a planned bond sale next week.
And according to county officials, they won’t be penalized for Detroit’s recent bankruptcy filing.
Oakland County has the highest bond rating possible—AAA. And officials say that’s allowed them to sell bonds at a reasonable interest rate, despite Detroit’s recent bankruptcy.
From the Detroit Free Press:
The Oakland County sale, which is a refinancing of existing bond debt, could save the county as much as $130 million in interest over the life of the bonds, said Robert Daddow, deputy executive for Oakland County, which has a AAA bond rating.
“Any issue Detroit may have from their implosion isn’t going to affect us,” he said. “Our credit is going to stand on its own.”
Other Michigan cities and counties have had to withdraw some bond offerings recently because investors are skittish about the state.
Of particular concern to investors is Detroit emergency manager Kevyn Orr’s plan to treat all Detroit’s unsecured debt the same in bankruptcy. That treatment violates long-beliefs that municipal debt—particularly so-called general obligation bonds—are rock-solid investments.
Gennessee County, Saginaw County and Battle Creek have all had to delay planned bond sales in recent weeks because of high interest rates. They had somewhat lower bond ratings.
And Oakland County officials admit that while they were able to secure a reasonable deal, some firms who bid to underwrite their bonds wanted higher rates, too. Again, the Free Press:
Daddow said Bank of America Merrill Lynch, which was selected as senior underwriter for the offering, told the county its strong rating means the Detroit bankruptcy would not impact its sales. But other finalists for the job predicted there could be as much as a 5 to 15 basis point penalty on the county’s debt because of the Detroit bankruptcy situation, he said.