City of Monona, Wisconsin
General Obligation Refunding Bonds, Series 2013
Underlying Rating: AA/NR/NR
Sale Date: 04/16/2013
Role of HSE: Sole Manager
On April 16, 2013, Hutchinson, Shockey, Erley & Co. acted as sole manager on a $7.67 million transaction for the City of Monona, Wisconsin. Monona is completely surrounded by Madison and is part of the Madison Metropolitan Statistical Area.
When the federal sequestration took effect in March, issuers who structured their Build America Bonds with Extraordinary Redemption provisions were able to act on those options. The bonds were issued for the purpose of paying the cost of refunding the Series 2009 and 2010 Notes as a result of the City exercising the Extraordinary Redemption provisions for the Notes.
The City issued the Notes subject to an Extraordinary Redemption in the event that an Extraordinary Event occurs. An Extraordinary Event included either (a) that the BAB subsidy of 35% would be either reduced or eliminated or (b) if the US Treasury fails to make a cash subsidy payment to the City where the failure was not caused by any action by the City.
On March 18, 2013, the City received noticed from the Department of the Treasury indicating that there were automatic reductions of the subsidy which took effect as of March 1, 2013. Thereafter, the City received a reduced subsidy payment and decided to exercise the Extraordinary Redemption for the Notes.
The transaction was the first BAB refunding to enter the marketplace. The bonds were structured with coupons ranging from 1.0-3.0% with a final maturity in 2023. There is a 7-year call option beginning on October 1, 2020.