The Indiana Finance Authority said increased transparency on its sale of $292 million of new-money, state revolving fund bonds with a green designation drew new investors to the table, driving up demand.
The state, which priced the bonds on Wednesday, launched an
“We saw strong demand with many different investors despite a tough market,” said IFA spokeswoman Stephanie McFarland. “Any additional transparency will bring in additional investors, which is always a plus for Indiana and the municipal market in whole.”
The IFA declined to provide additional details on the number of investors and how that compared to previous state revolving fund sales.
The authority designates the bonds as green bonds because the projects financed under the program are environmentally beneficial. McFarland said that the IFA was able to sell bonds at levels that reflected the strong credit of the SRF Program, despite a volatile market with interest rates on the rise.
The overall interest cost was 2.45% on the $345 million, six-year, tax-exempt bonds – the largest tranche sold. The bonds went out to 2035 with the yield on the final maturity landing at 3.35%. All of the deal offered 5% coupons.
The bonds are rated triple-A by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings. All also assign a stable outlook. As of June 2018 the authority has $1.3 billion of senior bonds outstanding.
Bank of America Merrill Lynch and Goldman Sachs & Co. LLC are co-senior managers and PFM Financial Advisors LLC is advising the authority. Ice Miller LLP is bond counsel.
The IFA’s green bonds are earmarked to fund loans for eligible projects that are verified as environmentally beneficial. Eligible projects are designed to improve the quality of Indiana’s drinking water and reduce pollution in its water supply according to state and federal standards. Revenue streams such as water-related taxes or water-related fees provide repayment for the bonds.
IFA is responsible for the administration and management of the state revolving funds. Bond proceeds and recycled funds are combined with federal grants and a state matching requirement to provide loans for such projects.
“Most of the program's pool metrics, such as pool credit quality and diversification, have remained stable over the past few years,” Fitch said. “However, the program's financial structure has shown some moderate weakening in Fitch's model analyses.”
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