The Minnesota Rural Water Association's MIDI Loan
Program provides Minnesota units of government with a
quick and low-cost alternative to conventional G.O. Bond sales. It
is most suitable for debt amounts of up to $1 million,
which can be repaid in 15-years or less.
Drown Associates (DDA) is the financial advisor and
servicer for the program.
Basic Credit Criteria:
must have a
population of 400, reduced to at least 200 if population has not
declined since the 2000 census.
Borrower's G.O. direct debt must be
less than $5,000 per capita, including the proposed debt amount
and including any debt the borrower plans to issue in the next
Debt must carry the full faith and
credit G.O. Pledge of the borrower.
Note amounts are limited to $1
million or less, and repaid over 15 years or less.
• Application: Borrower submits application package to MN
Rural Water or DDA. This package consists of:
o An Application Form (signed by Mayor and
o An electronic copy of the borrower’s
latest audited financial statements
o A summary of all projects or debt
obligations undertaken or expected that are not included in the
• Pre-Qualification and
Commitment. DDA will promptly review the application materials
borrower meets credit criteria, DDA will inform the borrower that it
is “approved for funding” provide a binding commitment to interest
rate and terms, and schedule the date for Governing Board final
approval. (If basic
credit criteria are not met, DDA will advise borrower that further
review is required and will work with lender on a specific package
• Sale and Approval: On date of sale,
borrower’s governing board passes a resolution prepared by bond
council approving the issuance of the Note.
• Closing: After sale is
approved, bond counsel processes the resolution and other documents
in preparation for closing - usually two weeks after sale. On date
of closing, the lender will mail or wire funds to the borrower.
• On-going Servicing: Prior
to every payment date, the paying agent mails a payment notice to
the borrower. Payments by check are due three (3) days prior to the
payment date. Payment by wire are due on the payment date.
Benefits to Borrowers:
• Easy application and immediate
commitment. Disclosure and rating duties for conventional bonds
can drag out for weeks and months. With a Midi-loan, a qualified
borrower with a complete application packet will receive a binding
commitment almost immediately. That commitment will remain “firm”
until the next scheduled meeting of the governing board.
• Lower issuance costs – and
smaller debt issues! By placing loans directly with a large,
commercial lender, borrowers avoid thousands of dollars of
underwriting fees and rating fees. This means lower issuance costs and a
smaller bond issue.
• Flexible Prepayment.
Midi-loans can be prepaid in whole or in part at any time; call
protection of conventional bonds often prevents a borrower from
prepaying their bonds for as long as 10 years. While there is a call
premium of 1.00% during the first 5 years, the flexibility to prepay
to deal with unforeseen problems or opportunities can often make
this premium negligible. Nice to have the option.
• Competitive Payments.
Midi-loans are designed to produce bond payments comparable to
conventional rated sales, but without the added issuance costs and
added convenience and flexibility.
• Free quotes and preliminary
structuring. Our professional advisors will provide you with an
analysis and proposal for your project at no cost.
• Professional advisor support
available as needed. Borrowers needing extra help to revise
utility rates, evaluate funding options, or work through the
assessment process need not look elsewhere for project financing.
Our registered, independent financial advisors will gladly attend a
council meeting or work session to explain options and provide all
the professional guidance you need. These services are all part of
the MIDI program. Feel free to use them.