Legal Aid and Defender Association, Inc. (Detroit, MI)

About the Association

The Legal Aid and Defender Association ("LAD" or the "Association") is the largest provider of free legal services to the indigent in Michigan and one of the largest in the United States.  With a  full-time staff of 150 and an annual operating budget of $15.2 million, LAD closes more than 11,800 cases a year.

The Longhouse Challenge

Longhouse was engaged by the Association in the spring of 2013 to help the organization select a new financing partner for its outstanding letter of credit backed variable rate bonds.

The Result

A credit memorandum to 15 banks requesting proposals to provide either a tax-exempt direct placement or a taxable loan.  Ultimately, the Association selected a taxable mortgage loan with a new bank.

LAD appreciated the simplicity of the taxable mortgage structure relative to its prior tax-exempt letter of credit backed financing.  In particular, the financing had:

  • No need for a municipality or an authority as Issuer

  • No synthetically fixed rate swap

  • No Trustee or Remarketing Agent

  • One monthly payment directly to one bank

Longhouse also restructured the Association's existing Debt Service Coverage Ratio covenant so that it removed the impact of accounting and pension valuation changes and was only calculated annually, rather than on a 4-quarter rolling basis.  The Association will continue to pledge the same mortgaged property that it had on its prior financing.

In August 2013, LAD closed the loan which provides a 5-year credit commitment and a fixed rate during those five years that will save the Association an estimated $350,000 annually relative to its prior debt service.

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