Updated September 16, 2013, 4:24 p.m. ET

Michigan's Genesee County Sells About $35 Million in Debt

Genesee's Sale Was Delayed After Detroit's Bankruptcy Filing




Genesee County, Mich., sold about $35 million in debt Monday, after last month postponing a bond sale in the wake of Detroit's record municipal-bankruptcy filing.
The county, which is about 60 miles from Detroit, in the heart of auto country, paid higher interest rates than similar debt to entice investors, and it sold less debt than was earlier intended. The county originally planned to borrow about $53 million in the market.
Proceeds from Monday's bond sale will be used, in part, to make improvements to the county's water-supply system, and investors will be repaid with net revenue from that system, according to Moody's Investors Service. The county's general-obligation pledge also backs the bonds.
The bond with the longest duration in Genesee's offering, maturing in 2038, had a yield of 5.51%. A comparable single-A-rated bond yielded about 5.02% as of Friday, according to Thomson Reuters Municipal Market Data.
"As every investor knows, timing is everything, and the timing is good for Genesee," said Matt Dalton, chief executive at Belle Haven Investments, which oversees about $1.6 billion in fixed-income assets. He said his firm participated in the deal. The Genesee deal is "priced cheap to a comparable out-of-state bond, but that should be expected with the current wrangling in Detroit."
A request for comment from Keith Francis, Genesee County's controller, wasn't immediately returned.
Municipal-bond prices rose Monday, in tandem with the broader bond market, following the decision by former Treasury Secretary Lawrence Summers to bow out of the race to be the next Federal Reserve chairman. Municipal Market Data's benchmark of top-rated municipal debt showed yields on bonds flat to as much as 0.10 percentage point lower Monday. Prices and yields move inversely.
Bond insurance from Build America Mutual was also available on the debt, which was rated "A2" by Moody's Investors Service and "A-plus" by Standard & Poor's Ratings Services.
Another positive factor: Just $3.2 billion in new municipal debt is expected to be sold this week, versus the $5.6 billion weekly average for the year, according to Municipal Market Data. Debt sales were light ahead of the Fed's policy meeting Wednesday, when investors expect more information about when the U.S. central bank may scale back its support of the bond markets.
Genesee County, which is home to Flint and whose largest employer is General Motors Co., was one of at least three local governments in the state that delayed plans to borrow after Detroit's bankruptcy filing. Battle Creek, which also planned to borrow in August, sold $15 million in debt last week. Saginaw County has yet to return to the bond market with its $60 million deal.
Some investors say they are hesitant to lend cash to local Michigan governments because of uncertainty over how bondholders will be treated in Detroit's bankruptcy. The city's emergency manager, Kevyn Orr, has proposed forcing some bondholders to take losses.
Write to Kelly Nolan at kelly.nolan@dowjones.com
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