Massachusetts Higher Education Fund Aims to Raise $394.7 Million in Revenue Bonds
The Massachusetts Education Financing Authority (MEFA) is preparing to issue $394.7 million Series M, 2022 Education Lending Revenue Bonds, which will provide liquidity for private student loans and refinanced loans.
The MEFA 2022 series – the second issue of the M issue resolution – will issue notes that have approximately 10.4% on its ‘AA’ and 6.1% ‘BBB’ ratings in credit support, including l excess spread, on its break-even flow scenarios, respectively. These levels of credit support provide coverage multiples of around 5.8x for senior bonds and 3.4x for subordinated bonds, according to a pre-sale report from S&P Global Ratings.
RBC Capital Markets and BofA Securities are the underwriters in the transaction, which is expected to close on June 23. At closing, the series will consist of approximately $278.1 million in federally taxable bonds, $88.1 million will be 2022B AMT Senior Bonds and $28.5 million will be 2022C AMT Subordinated Bonds. All bonds are fixed rate.
With the proceeds, MEFA expects to generate some $271.5 million in new loans during the origination period ending September 30, 2023, and may use excess revenue to generate additional loans during the refresher period. ending on December 31, 2023.
Among other features, the MEFA 2022 series will issue serial and term bonds, according to S&P. The bulk of the transaction is comprised of senior serial bonds.
The $134.7 million 2022A Notes and $35.7 million 2022B Senior Term Notes, both rated ‘AA’, will be subject to compulsory redemptions from the sinking fund, according to the report. presale. In such an arrangement, a dedicated fund will accumulate the proceeds specifically to redeem the bonds issued before the maturities of the operation. On the current transaction, these maturity dates are July 1, 2038.
The bulk of the transaction is expected to be rated “AA”, while the $28.5 million 2022C subordinated notes are rated “BBB”.