Series 7 GO Bonds

G.O. bonds issuances form

Serial form - all bonds are issued/sold on the same day, but mature at different times which allows for staggered repayment schedules and helps manage cash flow for issuers.

People involved in processing a G.O. Bond

1. Financial advisor/ Municipal Advisor - acts in a fiduciary capacity to provide financial guidance and assist in the bond issuance process.

2. Bond Counsel - a group of specialized lawyers that review the legal aspects of a bond- the municipality are hoping for an unqualified status

   1. bond has been properly authorized - voted on

   2. legality of the issuance - following all the laws

   3. considers constitutional debt limits - can get voter approval to raise it

   4. tax status

3. Underwriter - purchases the bonds from the issuer and sells them to investors/ the public.

   1. Underwriter Syndicate - most often broker dealers

Qualifiers

Qualifiers reduce marketability on GO bonds

They are requirements set forth to own the bond

Official Statement

Not required, but most likely will not sell without one

Description and characteristics of bond

Purpose and use of proceeds

Revenue sources

Financials of the municipality

Dated Date

The first day of the bonds existing and the first day bonds begin accruing interest

Electronic Municipal Market Access (EMMA)

Managed by the MSRB

Contains: Official statements, Trading activity, Market statistics, 529 and ABLE account information

Bond Buyer -indexes and yield curve

Redvex

Bond Buyer index

Bond Buyer 20

Bond Buyer 11

SFIMA index

Municipal Market Data Yield curve

Revdex

25 revenue bond rated A or better

Published weekly

Bond Buyer index

Tracks 40 municipal (GO and Revenue) Bonds rated A or better

Published daily

Bond buyer 20

tracks 20 GO bonds rated A or better

Bond Buyer 11

Tracks 11 GO bonds rated AA or better

published weekly

SIFMA Index

Tracks variable rate demand notes

SIFMA= Securities Industry and Financial Markets Association

Published weekly

Municipal Market Data (MMD) yield curve

Yield curve of AAA-rated municipal bonds

Lead Underwriter Responsibility

Establish the spread breakdown

define the liability for the syndicate

set sales priorities

lead the bidding effort

Manage and settle the offering

Management fee

paid to the lead underwriter for it management services - typically smallest portion of the spread

Additional takedown

paid to each syndicate member; compensates syndicate members for buying the bonds on a firm basis

Selling concession

paid to the firm that actually sells the bonds to investors

Total takedown

Additional takedown + Selling concession

Selling group members

Members that the syndicate have asked for help to sell bonds - will only receive selling concession since they are not taking on the responsibility of holding leftover bonds

Eastern syndicate

undivided syndicate - pooled liability

Western Syndicate

Divided syndicates - your responsibility to sell you bonds

Typical Sales Priorities

Pre-sale

Group net - fees are shared with the whole syndicate

Designated - one syndicate member gets the fees

Member- is a syndicate member is trying to buy

Manage and settle the offering

Syndicate accountant must be settled within 30 calendar days of receiving the bond transfer

Limit tax Bond

can only draw from a predetermined amount of tax revenue - helps ease voters unease about rising taxes

Broad drivers of credit quality

Population and Municipal finances

Population

Population growth or decline

income per capita

Economic Diversity

Municipal finances

Debt limit

revenue forecasts

balance sheets

pension liability

Debt statement

Direct debt: all debt directly issued by the municipality

Net direct debt: direct debt - self-supporting debt (revenue bonds)

Overlapping (coterminous) debt: Debt shared with other municipalities

Net overall (total) debt: Net direct debt (Direct debt -self-supporting debt) + overlapping debt