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

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

2QQUATEMAN LLPUATEMAN LLP

IntroductionIntroduction

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

Questions


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…)


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


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


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 . . .)


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


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


Other AgreementsOther Agreements

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

Swap documents BABs filing agreement


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


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?




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/[email protected]