Moody’s Investors Service upgrade of Maine energy housing and economic recovery bonds to Aa3 was well-deserved, according to its state treasurer.
Moody’s on Tuesday boosted the so-called MEHER bonds, which the Maine State Housing Authority issues, to its fourth-highest rating, one notch, for its Series 2021 1 and 2 bonds, while maintaining a stable outlook.
“I am pleased to see this upgrade,” Treasurer Henry Beck said in a statement. “Utilization of this program created during the last energy and financial crisis, now bolstered by increased revenue performance, will be crucial to creating housing opportunities for Maine’s workers and families.”
S&P Global Ratings rates the bonds A-plus.
MaineHousing intends to sell $54.2 million of the bonds in two tranches, possibly next week, although officials have yet to specify a date. The sale will feature $39.2 million of Series 2 taxables and $15 million of Series 1 tax-exempts, with maturities of 2034 and 2037, respectively.
Citigroup and Barclays are lead managers.
State lawmakers established the MEHER program to backstop affordable housing for families improve the energy efficiency of housing through the construction and substantial rehabilitation of multifamily housing and the replacement of older substandard manufactured housing units.
Moody’s cited the strong performance of the pledged revenue and strong debt-service coverage over the last decade. The Aa3 rating also incorporates the pledge of 50% of the treasurer's portion of statewide real estate transfer taxes collected in the state, which Moody’s rates Aa2 and stable; standard legal provisions; and “significant potential for revenue volatility mitigated by high debt service coverage.”
Stronger legal provisions, including a higher additional bonds test and a debt service reserve fund requirement, could lead to an upgrade, said Moody’s, while substantial and protracted decline of pledged revenue that provides significantly lower debt service coverage could lead to a downgrade.
MaineHousing, which opened in 1969, is a $1.8 billion independent state agency. It engages public-private partnerships while using little state funding. The organization says it benefits roughly 90,000 Maine households a year and pumps more than $300 million into the Maine economy annually.
Kutak Rock LLP is bond counsel to MaineHousing while Hawkins Delafield & Wood LLP is representing the underwriters.
