MRWA Midi Loan Financing Program

Finance Your Next Project With MRWA’s Midi Loan Program.

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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. For more information call Lori Blair, Executive Director at 800-367-6792 or David Drown Associates at 612-920-3320. David Drown Associates is the financial advisor and servicer for the program.

Application Form | Standard Bond Counsel Services | Standard Agreement & Engagement Letter | Standard Pay Agreement

Basic Credit Criteria:

Borrowers 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 12 months.
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.

Process Steps

• Application: Borrower submits application package to MN Rural Water or DDA. This package consists of:
o An Application Form (signed by Mayor and Clerk)
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 audit.

• Pre-Qualification and Commitment. DDA will promptly review the application materials received. If 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 and proposal.)

• 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.