Dickinson Wright bond team counsels ‘National Deal of the Year’


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The Bond Buyer, a daily trade publication for municipal finance, selected Dickinson Wright’s work on the Michigan Finance Authority’s multibillion-dollar re-financing of the state’s federal unemployment insurance loan as the 2012 National Deal of the Year.

Dickinson Wright attorneys Terence M. Donnelly, Kester K. So and Thomas V. Yates served as co-bond counsel to the Michigan Finance Authority on the bond issue. Donnelly and Yates operate out of the firm’s Troy office, while So is based in Lansing.

The Michigan Finance Authority’s $3.3 billion of unemployment obligation assessment revenue bonds allowed the state to save millions of dollars in interest costs associated with a loan from the federal government for unemployment insurance benefits. It served as a model for subsequent transactions by other states in the municipal bond market.

“We were thankful for the opportunity to serve as bond counsel to the Michigan Finance Authority for such an important financing that has had a positive financial impact on both the state and the business community,” So said. “Recognition is nice, but our focus was always on executing the transaction in a timely and efficient manner — and achieving the overall goals for doing the transaction.

“One of the ultimate goals was to lock in interest rates in this historically low interest rate environment, which we were able to achieve through a short-term financing done in record time at the very end of 2011. This initial transaction was later taken out by mostly fixed rate and some variable-rate bonds issued earlier in 2012 at extremely low interest rate levels.”

The deal was chosen from approximately 90 nominations, which included deals that closed between Oct. 1, 2011 and Sept. 20, 2012. The Bond Buyer’s editors and bureau chiefs evaluated the deals, looking for innovation, the ability to pull complex transactions together under challenging conditions, deals that could or did serve as a model for other financings and the public purpose for which a transaction’s proceeds were used.

“This was a transaction that was big, precedent setting and AAA all around,” said Gavin Murphy, editor in chief of The Bond Buyer, at the award ceremony in New York City on Dec. 5. “It provided a template for subsequent deals, a low cost of capital and benefits for both the public and private sectors.”

So said the transaction was unique for four main reasons.

“One, the bonds were the only unemployment sector bonds to have achieved a AAA rating from all the major rating agencies and are payable from obligation assessments paid by employers. Two, the bonds were structured with a mixture of serial bonds, short-call bonds and variable-rate bonds, so the authority would have low cost redemption flexibility. Three, the actual interest rates resulted in an extremely low cost of capital. Four, there were significant benefits to Michigan employers through interest cost savings, the current elimination of the solvency tax and the restoration of the Federal Unemployment Tax Act credits. Restoring the solvency of the Unemployment Trust Fund was an important goal of the state.”

So said that three other states have since used a similar structure or model where those states have financed or re-financed their unemployment benefit obligations.

“We congratulate the state and the staff of the authority, the Department of Treasury and the Department of Licensing and Regulatory Affairs for putting together this complex and innovative transaction and on this award and recognition,” So said.

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