2006 csmfo conference
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2006 CSMFO Conference. “Having the Right Finance Team for Bond Sales”. Speaker Panel. Moderator – Jerry Rogers, City of Riverside Issuer – Dennis Coleman, City of Solana Beach Underwriter – Janees Williams, Kinsell, Newcomb & De Dios Inc. - PowerPoint PPT PresentationTRANSCRIPT
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2006 CSMFO Conference
“Having the Right Finance Team for Bond Sales”
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Speaker Panel Moderator – Jerry Rogers, City of Riverside Issuer – Dennis Coleman, City of Solana Beach Underwriter – Janees Williams, Kinsell, Newcomb &
De Dios Inc. Financial Advisor – Jim Fabian, Fieldman, Rolapp &
Associates Trustee/Fiscal Agent – Carl Boyd, Union Bank of
California
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Bond Issuer
Dennis Coleman
City of Solana Beach, Finance Director
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The Players Issuer
Hires the team Approves financing Provides financing objectives
Bond Counsel Issues opinion as to validity and exemption Drafts basic legal documents (e.g. Trust Indenture) and
Resolutions Disclosure Counsel
Drafts Offering Document (Preliminary Official Statement – POS) (Official Statement – OS)
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The Players (cont.) Underwriter
Provides access to capital markets by purchasing bonds at wholesale and selling bonds at retail
Role will vary, depending upon whether debt offered at public sale, negotiated sale or private placement
Financial Advisor Advises on suitability of financial plan, pricing, terms and
structure Role will vary, depending upon whether debt offered at public
sale, negotiated sale or private placement Trustee/Fiscal Agent
Administers bond proceeds, pays debt service to bondholders, invest bond proceeds
Dissemination Agent Disseminates annually continuing disclosure information
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The Issuer Adopts Policy guidelines for the issuance of short-
term and long-term debt. Determine appropriate process for selecting Finance
team members. Provide Finance Team with objective to be
accomplished by the issuance of debt. Approve all legal and financing documents required
to issue short-term or long-term debt
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Bond Counsel Advise the Issuer on appropriate legal structures for
the bond issue. Draft the bond documents in accordance with State
law and to meet the financing goals of the Issuer. Review proposed use of bond proceeds and advise
on any Federal tax issues or state law limitations. Deliver a legal opinion at bond closing that the
bonds are legally and validly issued and that interest on the bonds is exempt under Federal and California tax law.
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Disclosure Counsel Prepares Preliminary Official Statement and Final Official
Statement to be used to market the Bonds by the Underwriter.
Provides required Legal Opinion (10b-5) for the Official Statement
Prepares Continuing Disclosure Agreement specifying the information the Issuer will be required to annually disseminate to the Bond Market.
Prepares Bond Purchase Agreement specifying the terms and conditions that the Underwriter agrees to purchase the Bonds from the Issuer and to re-sell them to investors.
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Underwriting Services
Janees Williams, Vice President
Kinsell, Newcomb & De Dios Inc.
Investment Banking, Advisory and Underwriting Services to municipalities, school districts and governmental entities.
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Underwriter The Underwriter is the “Quarterback” for the Financing
Coordinate Financing Team and Schedule Finance Structure
Finance Structure Bond Characteristics Credit Rating / Credit Enhancement Marketing, Sale of Bonds, and Closing
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Bond Characteristics Serial versus Term Bonds
Sinking Fund redemptions Par, premium or discount bond
Coupon versus yield Issuance of parity debt / additional bonds test / coverage test
Protects bondholder’s position Limits ability to issue debt in future
Optional redemption / call protection / call premium 10-year call protection common
Funds and accounts Capitalized interest account – timing issue Reserve account / liquidity reserve – addresses shortfall but replenished
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Credit Rating/Credit Enhancement A Better Rating and Credit Enhancement provides better interest rates
Major rating agencies – Standard and Poor’s, Moody’s and Fitch AAA Bond insurance - MBIA, FSA, AMBAC, XL Capital
Assessment of probability of timely payment and/or default Review the facts
Financial condition Major customer / taxpayer Covenants and remedies
Insurer makes financial commitment Guarantees timely payment of principal and interest Paid an upfront premium based on total debt service Economic decision – cost of insurance versus credit spread
Bonds issued as “Non-Rated” require more pre-marketing
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Marketing, Sale of Bonds and Closing
Answer Investor questions Site visit
Pre-pricing Identify comparable issues Structure / rates put forth for negotiation
Pricing Coupons, yields, redemption features negotiated YTM, YTC and average life Over-subscribed maturities may be re-priced Underwriter receives award Orders from buyers confirmed Bond Purchase Contract executed – Issuer and Underwriter committed
Mail Final OS Bond proceeds are wired
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Financial Advisory Services
Jim Fabian, Principal
Fieldman, Rolapp & Associates
Financial Advisory Services to government agencies and non-profit organizations
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The Role of the Financial Advisor Planning of the Financing Program:
Review of Issuer’s Financial Policies Determine how much money is needed When is it needed How much will it cost
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The Role of the Financial Advisor Management of the individual sales of debt required
to execute the program: Probably the most visible part of what we do, but by no
means the most important Role varies depending on whether debt will be sold
negotiated or competitively based upon the issuer and the facts
Provide recommendation of credit rating process and bond insurance procurement
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The Role of the Financial Advisor Assist in the Selection of other Finance Team
Members if requested: Provide recommendations for sole source selection based
upon expertise and experience of firms Solicit proposals based on formal process, evaluate
proposals and provide recommendation based upon review of proposals
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The Role of the Financial Advisor Advise on the reinvestment of bond proceeds
Acts as the Issuer’s Investment Advisor to solicit bids from investment providers
Assists the Issuer’s existing Investment Advisor in the solicitation of bids from investment providers
Provide recommendations on short-term investment strategies (i.e. Purchase of Treasuries, Agencies or Local Agency Investment Fund)
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Bond Trustee Services
Carl Boyd, Vice President
Union Bank of California, N.A.
Corporate Trust and Escrow Services
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Trustee Regulations The Trust Indenture Act of 1939, as amended,
requires a Trustee to be appointed
“to protect and enforce the rights and represent the interests of such investors”
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Bond Trustee Services Pre-Closing:
Review documents Hold good faith deposit Deliver bonds to DTC or safekeep bonds for life of issue Authenticate bonds
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Bond Trustee Services Closing:
Receive bond proceeds from underwriter Transfer funds as required Pay costs of issuance Coordinate closing with all parties
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Bond Trustee Services Account Setup Systems:
Trust Accounting Bondholder Recordkeeping/Payments Account Management/Ticklers
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What does a Trustee do? Perform financial and compliance administration as
required in the Trust Agreement, Tax Certificate, Disclosure Agreement and related documents
Act as a “Prudent Man” in representing the interests of the investors
Represent investors in a default or settlement matter
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What does a Trustee do? Read all trust documents Tickler all covenant requirements, request and
compile compliance items Schedule, calculate and initiate interest payments
and redemptions Open accounts required under Trust Agreement,
invest funds, transfer as necessary Serve as central point of contact for all post-issuance
information
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Trustee Services A Trustee helps the issuer by providing management
and reporting services: Investment and accounting of bond proceeds, collecting
revenues and processing disbursements Ensure compliance with Trust Agreement covenants Calculate interest, redemptions and pay investors Act as liaison and disseminate financial information to the
industry
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Trustee Services A Trustee routinely interacts with:
Bond Insurers Letter of Credit Banks GIC Providers Remarketing Agents Bond Council Repositories Underwriters/Financial
Advisors
Investors Securities Brokers Auditors Arbitrage Rebate Firms Rating Agencies Investment Advisors
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Selecting Your Trustee
Location? Who is the account officer? References? Check with bond counsel/financial
advisor. Issue RFP? Do you feel comfortable working with them for the
next 30 years?
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Other Potential Finance Team Members
Fiscal Consultant Required for issuance of Tax Allocation Bonds to project tax
increment revenue stream. Verification Agent
In a bond refunding an independent party who provides an opinion that there are sufficient funds to defease the Refunded Bonds.
Assessment Engineer/Special Tax Consultant Required to prepare an Engineer’s Report or Facilities Report for the
Issuance of Land Secured Bonds. Appraiser
Required to provide Independent Market Valuation of property that secures the repayment of Land Secured Bonds.
Rate Specialist Required to prepare a rate study for the Issuance of Revenue Bonds
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Question & Answer
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Thank You!
We sincerely appreciate you joining us today
and participating in the
2006 CSMFO Conference.
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Panel’s Contact information:Jerry Rogers, City of Riverside - [email protected]
Dennis Coleman, City of Solana Beach – [email protected] 1-858-720-2461
Janees Williams, Kinsell, Newcomb & De Dios Inc. – [email protected] 1-858-793-5900
Jim Fabian, Fieldman, Rolapp & Associates – [email protected] 1-949-660-7307
Carl Boyd, Union Bank of California – [email protected] 1-213-972-5683
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