The Great Lakes Water Authority (GLWA) was able to earn a AA credit rating for its recent bond issuance, which will provide $250 million in new funding for regional water and wastewater system capital improvements.
This most recent bond sale will help fund in capital improvements for the regional water and wastewater systems and will assist GLWA as it continues to focus on system resiliency and affordability.
The GLWA provides nearly 40 percent of Michigan’s population with water as well as wastewater services to nearly 30 percent of the state.
GLWA also was able to secure $46 million ($29 million of present value savings) in cashflow savings by refinancing eligible regional system bonds. The funding from the bond sale will provide support for GLWA’s capital improvement plan in the near term for a broad selection of projects focused on reliability, redundancy, and resiliency.
In advance of the bond transaction, GLWA earned upgrades into the ‘AA’ category from two of three bond rating agencies, as well as an affirmation of its “AA” rating from the third bond rating agency:
- Moody’s Investors Service moved GLWA’s senior lien debt into a new level of investment grade rating at Aa3 (up from A1) for both the water and sewer systems.
- Fitch Ratings moved GLWA’s senior lien debt for the sewer system to AA- (up from A+) and affirmed its A+ rating for the water system.
- Standard & Poor Global Ratings affirmed its outstanding senior lien water and sewer system debt at AA-.
The rationale for the upgrades is outlined in the reports from each rating agency. Moody’s credit opinion stated that the “GLWA has effectively balanced its hefty capital needs with an affordable rate structure, stable operating performance, consistent debt service coverage and good liquidity for systems since its inception in 2016.”
“GLWA now having achieved the “AA” ratings category by all three ratings agencies is recognition of our utility’s long-term strategy for affordability and system resiliency, and a testament to the hard work of every team member at GLWA,” says Freman Hendrix, chairperson of the board of directors for the GLWA.
The bond transaction focused on securing $150 million in new money to replenish funding for water system capital improvement projects and $100 million in new money to replenish funding for wastewater system capital improvements (total of $250 million).
The new money tax-exempt bonds were issued with a true interest cost of 4.64 percent for both the water and wastewater systems. GLWA was able to secure necessary capital funding at historically attractive levels that takes risk off the table for the future.
“The funding from this bond sale will provide strong support for our Capital Improvement Plan (CIP) in the near term, allowing our water and wastewater teams to undertake a broad cross section of projects which are focused on reliability, redundancy and resiliency in three main areas: asset renewals, optimization, and innovation,” says Suzanne R. Coffey, CEO of the GLWA.
