• ISIN: US59447PYT29
  • Entity Name: Michigan Finance Authority
  • Sector: Municipal Agency
  • Announcement Date: *****
  • Effective Date: *****
  • Issue Date: *****
  • Maturity Date: *****
  • Country of Issuer: *****
  • Region: N.Amer
  • Issue Currency: *****
  • CA Type: Rating Downgrade
  • News: S&P Global Ratings has lowered its long-term rating on Michigan Finance Authority`s Local Government Loan Program bonds (Public Lighting Authority [PLA] Local Project Bonds), series 2014B, by four notches to `BB+` from `A-`. The outlook is stable. The bonds were issued for the Detroit Public Lighting Authority (PLA) and are secured by Detroit`s utility users tax (UUT). The downgrade reflects application of our "Priority Lien" criteria (published Oct. 22, 2018, on RatingsDirect), which factors in both the strength and stability of the pledged revenues, as well as the general credit quality of the municipality where taxes are distributed and/ or collected (the obligor`s creditworthiness [OC]). The priority-lien rating on the bonds is limited by our view of the Detroit`s creditworthiness [BB-/Stable] and is constrained from going higher unless there is an improvement in the OC. In our view, the primary sources of operating risk lies with the city, as opposed to the PLA, given the PLA does not specifically levy or control the pledged revenues, residual revenues after debt service are used by the city, it has what we consider limited operations aside from servicing debt, and the city has significant involvement in its governance. In addition, revenues are generated by the residents and businesses of Detroit, tying collections to the economic health of the city. The PLA`s only operations are maintaining the street lighting system, and its only source of revenues are payments from the city to cover these costs. The PLA`s board is entirely appointed by the city mayor and city council, and its finances and debt are reported within the city`s audit. The two-notch distinction reflects our view that the pledged revenues and the flow of funds (under both state law and bond documents) are sufficiently removed from the city`s control, so as to substantially mitigate operating risk. Pledged revenues are collected by the private utility companies and then transferred to an independent trustee who holds collections until monthly deposit requirements are met, before remitting excess revenues each month to the city. Pursuant to state law, a lien is created in favor of the trustee on all pledged revenues collected or to be collected; and all pledged revenues are held in trust for the benefit of bondholders. We feel these factors significantly reduce the risk that pledged revenues could be diverted to address budgetary challenges of the city. Given the city is the levying authority of the UUT and our view of the close relationship between the city and PLA, under our criteria, this structure does not provide more than two notches of separation between the priority-lien rating and the OC. For Bond Document please visit
  • Description: *****
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