Two Rhode Island agencies will go to the market with negotiated infrastructure and housing deals next week.
The Rhode Island Infrastructure Bank on Tuesday plans a $128 million refunding of Series 2021A state revolving fund revenue bonds.
Tuesday will also mark the retail order period for the Rhode Island Housing and Mortgage Finance Corp.’s $172 million issuance of homeownership opportunity bonds, designated as social bonds. Wednesday’s institutional sale will include a $28 million taxable component.
Proceeds from the infrastructure bank’s sale will refund Clean Water State Revolving Fund and Drinking Water State Revolving Fund bonds, executive director Jeff Diehl said.
“What we’re doing is continuing the modernizing of the infrastructure bank,” Diehl said. “Interest rates are very low and we have a fair amount of redemptions coming.”
Raymond James & Associates and Hilltop Securities are senior manager and financial advisor, respectively. According to bond documents, the Infrastructure Bank has $765 million of debt outstanding.
The clean water trust indenture will refund certain maturities of the Series 2012A and B issuance, as well as Series 2014A, Series 2015 A and C and Series 2016 A and B. The drinking water trust indenture will refund certain maturities of Series 2012A, Series 2013A, Series 2014A and Series 2015A.
The Infrastructure Bank is issuing the bonds under a new master trust indenture, which combines both clean water and drinking water funding.
Bundling into a larger deal makes the package more attractive to the capital markets, Diehl added. “We think the market would like a larger, more liquid transaction.”
According to Diehl, 25 borrowers, including the Narragansett Bay Commission and the Providence Water Supply Board, will realize a combined $6.2 million of savings.
“These savings will help accelerate investment in other eligible clean or drinking water projects,” Diehl said.
S&P Global Ratings and Fitch Ratings both rated the bonds AAA.
“With another AAA bond rating, the Rhode Island Infrastructure Bank can continue creating jobs, moving the Ocean State toward out clean-energy goals,” state General Treasurer Seth Magaziner said.
Fitch said its cash-flow modeling demonstrates that program resources can withstand hypothetical pool defaults in excess of the rating agency’s AAA liability rating stress hurdle.
“Underlying borrower credit quality is strong in comparison to similar programs, with around 86% of the pool exhibiting investment-grade credit characteristics,” Fitch said. Concentration is high, though, as the pool’s largest single obligor represents about 29% of the pool and the top-10 obligors account for nearly 79%.
RIIB evolved in 2013 from the Rhode Island Clean Water Finance Agency. The predecessor agency already had triple-A ratings, giving the bank a running start in the bond markets. It expanded to include Municipal Road and Bridge Fund and again in 2015 to include the Efficient Buildings Fund.
Bank officials have been able to work efficiently throughout COVID-19, Diehl said. The agency went to a full remote format in March 2020, when the pandemic began to escalate. By then it had transformed its technology.
“We were processing online forms before the pandemic,” Diehl said.
Rhode Island, like other states, stands to benefit from any infrastructure bill that comes out of Washington. The Senate on Tuesday approved a $1.2 trillion proposal to improve aging infrastructure. The measure must still pass the House of Representatives, where contentious debate looms over the next several weeks.
RIHousing intends to sell $145 million of Series 75-A tax-exempt bonds and $28 million of taxable Series 75-T bonds. Officials expect proceeds to purchase $141 million of additional mortgage-backed securities.
Moody’s rates the bonds Aa1 and S&P Global Ratings rates them AA-plus. S&P also affirmed its AA-plus rating on all other issues under the parity resolution, totaling about $863.1 million.
Moody’s based its rating on “the strong financial performance of the indenture, the increase in the proportion of mortgage-backed securities within the portfolio, as well as the issuer’s intention to finance only MBS within the indenture, which will strengthen the composition of the portfolio.”
RIHousing officials said the “social bonds” designation of the Series 75 bonds reflects the use of proceeds consistent with principles established by the International Capital Market Association and mapping to four United Nations sustainable development goals.
It made its first such issuance, for $142 million, last September.
“What we do with our first-time homebuyers really aligns with social-bond principles that are out there,” Chief Financial Officer Kara Lachapelle said.
The agency, created in 1973, funds single-family lending programs through bond issuance through its resolution, sale of loans to Fannie Mae and sale of mortgage-backed securities.
In addition to its bond programs, RIHousing administers the Section 8 Housing Assistance Program, the home investments partnership program and the federal low-income housing tax credit, as well as other state and federal programs.
Officials say the state’s housing stock and building activity aren’t adequately addressing the 80% to 120% area median income housing market.
Its active single-family and multi-family bond programs have $1.15 billion of bonds outstanding as of June 30, including $844 million of homeownership opportunity bonds and $307 million of multi-family development bonds. Other debt totals roughly $240 million.
According to documents, 96.4% of its bonds are fixed-rate.
During fiscal 2021, it issued $277 million of homeownership bonds and $126 million of multifamily bonds.
In fiscal 2019, it shifted to a mortgage-backed securities program within its homeownership resolution. Since 2019, it has provided $382 million in mortgages and homebuyer assistance; $192 in rental assistance to 17,200 households and $145 million in financing to construct or rehabilitate 1,149 apartments.
In July, RI Housing approved awards for the creation of workforce housing under an innovation challenge its board approved in June. Officials say the awards will help build or preserve 301 rental units, of which 74 will be workforce-assisted units at developments in Providence and West Warwick.
The agency in January issued a request for proposals for program funds, the second funding round for the program.
Its initial round provided $3.4 million to two developments in Providence to assist the construction of 93 rental units, 38 of which are workforce assisted. The second round provides $5.9 million to four proposals.
Funded developments include the Studley Building, Strive Lofts and Case Mead, all in Providence; and Arctic Mill in West Warwick.