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07 Jun 2016
New York, June 07, 2016 -- Issue: School Loan Refunding Bonds, Series 2016A (Taxable); Rating: Aa1; Rating Type: Underlying LT; Sale Amount: $126,130,000; Expected Sale Date: 06/20/2016; Rating Description: General Obligation;
Issue: Environmental Program Refunding Bonds, Series 2016B (Tax-Exempt); Rating: Aa1; Rating Type: Underlying LT; Sale Amount: $58,610,000; Expected Sale Date: 06/20/2016; Rating Description: General Obligation;
Summary Rating Rationale
Moody's Investors Service has assigned a Aa1 to the State of Michigan's $126.1 million School Loan Refunding Bonds Series 2016A (Taxable) and $58.6 million Environmental Program Refunding Bonds Series 2016B. The outlook is stable.
The Aa1 rating incorporates the state's solid financial position and liquidity, a strong tax revenue trend driven by robust economic growth, and moderate debt and pension burdens. The rating also recognizes our expectation that the state will continue to oversee local government distress with manageable direct state financial exposure.
Rating Outlook
The stable outlook recognizes the state's healthy fund balance and liquidity position, as well as the stabilization and recent growth in the state's economy.
Factors that Could Lead to an Upgrade
Structural changes in the state's economy leading to greater diversity and resilience against recessions
Successful resolution of multiple challenges related to public school districts, including pension funding and the states constitutional guarantee of most debt service
Factors that Could Lead to a Downgrade
Greater than anticipated costs associated with assisting local governments
Deterioration in economic forecasts versus current assumptions
Erosion in fund balance and/or liquidity
Legal Security
The state's GO bonds are backed by the full faith and credit of the state. Pursuant to a bond resolution and Act 259 of 1982, the bonds represent an enforceable contract with bondholders. Both the state attorney general and bond counsel have opined that the bonds are valid and legally binding obligations.
Use of Proceeds
Proceeds of both bonds series will be used to refund outstanding bonds for net present value savings of $16.5 million, or 9% of refunded principal.
Obligor Profile
Michigan is a Midwestern state of 9.9 million people. It is the 13th-largest state economy, by gross state product.
Methodology
The principal methodology used in this rating was US States Rating Methodology published in April 2013. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.
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For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
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Dan Seymour
Lead Analyst
State Ratings
Moody's Investors Service, Inc.
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US
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Marcia Van Wagner
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Moody's Assigns Aa1 to Michigan's $185M 2016 GO Bonds; Outlook Stable
No Related Data.
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