important documents and managing debt service presented by: timothy j. reimers, esq. quateman llp...

IMPORTANT DOCUMENTSAND MANAGING DEBT SERVICE

IMPORTANT DOCUMENTSAND MANAGING DEBT SERVICE

Presented by:Timothy J. Reimers, Esq.

QUATEMAN LLPFebruary 3, 2011

Oakland, California

CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSIONCALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION

MUNICIPAL DEBT ESSENTIALSMUNICIPAL DEBT ESSENTIALS

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IntroductionIntroduction

Important provisions in financing documents Indenture Loan Agreement Tax Certificate Continuing Disclosure Undertaking Reimbursement Agreement Other Agreements

Questions

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Indenture (Trust Agreement, Fiscal Agent Agreement, Paying Agent Agreement, Bond Resolution, Bond Ordinance)Indenture (Trust Agreement, Fiscal Agent Agreement, Paying Agent Agreement, Bond Resolution, Bond Ordinance)

Purpose: Provides the terms and conditions of the securities (bonds, certificates of participation, notes. . .) and for the security pledged for repayment of the securities.

Important Provisions: Pledge Interest rate Payment and redemption (prepayment) Permitted investment of proceeds Terms for additional parity debt

(continued…)

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Indenture (Trust Agreement, Fiscal Agent Agreement, Paying Agent Agreement, Bond Resolution, Bond Ordinance)Indenture (Trust Agreement, Fiscal Agent Agreement, Paying Agent Agreement, Bond Resolution, Bond Ordinance)

Important Provisions (continued): Funds and accounts Rate covenants Prohibitions on senior debt Terms of subordinate debt Defeasance provisions Default and remedy provisions Insurance provisions

Financial guaranty Liability, hazard, title . . .

Compliance with debt policy

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Loan Agreement (Financing Agreement, Installment Sale Agreement, Facilities or Project Lease)Loan Agreement (Financing Agreement, Installment Sale Agreement, Facilities or Project Lease)

Purpose: For “conduit” financings, provides the terms and conditions under which the Issuer lends proceeds to the Borrower or otherwise provides for the project being financed.

Important Provisions: Representations, warranties and covenants Restrictions on use Assignment provisions Special covenants Pledge provisions Title provisions Insurance – liabilities, hazard, title, business interruption Abatement provisions (in leases) Remedies

Re-enter, re-let, termination, damages

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Tax Certificate (Tax Regulatory Agreement, Arbitrage Agreement, Land Use Restriction Agreement)Tax Certificate (Tax Regulatory Agreement, Arbitrage Agreement, Land Use Restriction Agreement)

Purpose: Provides agreements or certifications required to be made by the Issuer (or Borrower) to satisfy requirements of the Internal Revenue Code for tax exempt treatment of the securities.

Important provisions: Representations and warranties – rebate and arbitrage Sources and uses of proceeds Document retention BABs filing information Various other provisions depending on type of issue –

consult bond counsel (tax compliance, private use, refunding . . .)

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Continuing Disclosure Agreement (Continuing Disclosure Certificate)Continuing Disclosure Agreement (Continuing Disclosure Certificate)

Purpose: Provides undertakings of any obligated person (Issuer, Borrower . . .) to provide ongoing disclosure.

Important provisions: Contents of annual reports Delivery/timing of annual reports Filing of audited financial statements and budgets Reporting significant events Note – changes in Rule 15c2-12 for post-December 1,

2010 transactions

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Reimbursement Agreement (Financial Guaranty Agreement)Reimbursement Agreement (Financial Guaranty Agreement)

Purpose: Provides terms of obligation to repay letter of credit bank (or surety provider) amounts drawn on credit facility.

Important provisions: Representations and warranties Waivers Remedies Letter of Credit Covenants

Financial Disclosure

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Other AgreementsOther Agreements

Financial guaranty insurance Commitment letter “Standard” terms and conditions Continuing disclosure

Swap documents BABs filing agreement

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Documents that do not provide for continuing administrative responsibilities:Documents that do not provide for continuing administrative responsibilities:

Authorizing Document/ResolutionsPurpose: Authorizes the issuance and sale of securities, execution and

delivery of documents, directs staff to take other actions necessary to complete financing.

Purchase Agreement; Notice of SalePurpose: Provides for the sale of the bonds to the underwriter or

purchaser. But there may be certain obligations for a period of time through and after the underwriting period.

Official StatementPurpose: Provides disclosure to investors and potential investors.

TipsConsider: Debt Calendar and website updates

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Typical Questions:Typical Questions:

What exactly have we pledged for the repayment of our securities?

How much is our debt service and what does it consist of?

Is our Reserve Fund fully/adequately funded? We have these sureties, they have been

downgraded, are they still good for something?

Questions?Questions?

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IMPORTANT DOCUMENTSAND MANAGING DEBT SERVICE

IMPORTANT DOCUMENTSAND MANAGING DEBT SERVICE

For additional information, please contact:

Timothy J. Reimers, Esq.QUATEMAN LLP, , Attorneys at LawCentury Park Plaza1801 Century Park East, Suite 1801Los Angeles, California 90067Telephone: 310/556-1801treimers@quateman.comwww.quateman.com