California Debt and Investment California Debt and Investment - PowerPoint PPT Presentation

California Debt and Investment California Debt and Investment Advisory Commission Advisory Commission Mechanics of a Bond Sale: Mechanics of a Bond Sale: The Legal Documents The Legal Documents Presenters: Geoff Gibbs and Steve Walsh Presenters: Geoff Gibbs and Steve Walsh Oakland , CA Oakland , CA March 13, 2008 March 13, 2008

Presenters Presenters Geoffrey T. Gibbs -- -- Attorney Attorney Geoffrey T. Gibbs The Gibbs Law Group, LLP The Gibbs Law Group, LLP Oakland, CA Oakland, CA ggibbs@gotolawfirm.com ggibbs@gotolawfirm.com (510) 834- -8885 8885 (510) 834 Steve Walsh -- -- Issuer Issuer Steve Walsh County of Alameda County of Alameda Oakland, CA Oakland, CA stephen.walsh@acgov.org stephen.walsh@acgov.org (510) 272- -3844 3844 (510) 272

The Roadmap Documents The Roadmap Documents Time and Responsibility Schedule Time and Responsibility Schedule „ „ Issuer must seize control of this document (you will live with it) t) Issuer must seize control of this document (you will live with i „ „ Holidays, Super Bowl Sunday, etc.: they matter Holidays, Super Bowl Sunday, etc.: they matter „ „ Allow enough time for the team to read your documents Allow enough time for the team to read your documents „ „ Distribution List Distribution List „ „ The people on this list will be your “ “family family” ” for 8 for 8- -16 weeks 16 weeks The people on this list will be your „ „ Closing Memo Closing Memo „ „ Review an earlier example sooner rather than later: you need to know know Review an earlier example sooner rather than later: you need to „ „ now what you will have to produce at the end what you will have to produce at the end now

Sample Time and Responsibility Schedule Sample Time and Responsibility Schedule

The Right Schedule – – The Right Schedule Making The Timetable Work for You Making The Timetable Work for You Work backwards from the closing date Work backwards from the closing date „ „ Be aware of notice periods for board meetings Be aware of notice periods for board meetings „ „ Allow enough time for the team to review Allow enough time for the team to review „ „ documents documents Be realistic about weekends and holidays Be realistic about weekends and holidays „ „ Consult all key players before you reschedule Consult all key players before you reschedule „ „ key all- -hands sessions hands sessions key all

Sample Closing Memo Sample Closing Memo

Sample Closing Memo (additional pages) Sample Closing Memo (additional pages)

Types of Financings Types of Financings Bonds Bonds „ „ General Obligation General Obligation „ „ Lease Revenue Lease Revenue „ „ Enterprise Enterprise „ „ Fixed or Variable Rate Fixed or Variable Rate „ „ Certificates of Participation Certificates of Participation „ „ Notes Notes „ „ Refundings Refundings „ „

Financing Documents -- -- Resolution Resolution Financing Documents Approves and Authorizes the Financing Approves and Authorizes the Financing „ „ Establishes Financing Parameters: Establishes Financing Parameters: „ „ Maximum interest rate (or minimum savings) Maximum interest rate (or minimum savings) „ „ Maximum amount of borrowing Maximum amount of borrowing „ „ Underwriter’ ’s discount s discount Underwriter „ „ Other provisions (delegation of authority, insurance, Other provisions (delegation of authority, insurance, „ „ credit enhancement, ratification and approval of all other credit enhancement, ratification and approval of all other necessary actions) necessary actions) Approves the other documents and the Preliminary Approves the other documents and the Preliminary „ „ Official Statement in substantially final form Official Statement in substantially final form Remember signature authority and “all other necessary actions”

Financing Documents -- -- Indenture Indenture Financing Documents This document lays out the legal structure and terms of This document lays out the legal structure and terms of „ „ the financing. It will specify: the financing. It will specify: The maturities of the bonds The maturities of the bonds „ „ The principal and interest payment dates The principal and interest payment dates „ „ The revenues and accounts pledged to the repayment of the The revenues and accounts pledged to the repayment of the „ „ bonds bonds The flow of funds for the accounts (the mechanics of the The flow of funds for the accounts (the mechanics of the „ „ cashflow) ) cashflow Parity debt provisions (ability to issue future bonds) Parity debt provisions (ability to issue future bonds) „ „ Default and remedy provisions (what happens if something Default and remedy provisions (what happens if something „ „ goes wrong?) goes wrong?) Parity debt provisions bind you now and in future years --- make sure you understand their effect

Financing Documents – – Financing Documents Indenture (II) Indenture (II) This document lays out the legal structure and terms of the financing. It will ncing. It will This document lays out the legal structure and terms of the fina „ „ specify: specify: Prepayment or redemption provisions Prepayment or redemption provisions „ „ optional, extraordinary, or sinking fund optional, extraordinary, or sinking fund „ „ Permitted Investments Permitted Investments „ „ Amendment process Amendment process „ „ With Bondholder consent With Bondholder consent „ „ Without Bondholder consent Without Bondholder consent „ „ Defeasance provisions (in the event the bonds are refunded or prepaid) Defeasance provisions (in the event the bonds are refunded or pr epaid) „ „ Issuer Covenants (tax covenants, rate covenants, or foreclosure Issuer Covenants (tax covenants, rate covenants, or foreclosure „ „ covenants, depending on type of financing) covenants, depending on type of financing) Many of the key points in your financing will be addressed within the n the Many of the key points in your financing will be addressed withi „ „ “defined terms “ defined terms” ” at the beginning of this document at the beginning of this document Parties to the Agreement: Issuer and Trustee Parties to the Agreement: Issuer and Trustee Covenants you enter into re: taxes and rates will directly affect your budgets and operations for years to come.

Sample Indenture Table of Contents Sample - Table of Contents Indenture-

Financing Documents – – Financing Documents COP or Lease Revenue Structure COP or Lease Revenue Structure (1) Site lease: Public agency leases property to JPA Public JPA or Nonprofit Public Benefit Corporation Agency (2) Facility Lease: JPA leases back property to public agency in return for ongoing lease payments Trustee Underwriter (3) Indenture: JPA (4) Bond purchase pledges to repay agreement: Underwriter bonds commits to purchase of bonds

Financing Documents – – Financing Documents COP or Lease Revenue Agreements COP or Lease Revenue Agreements Site Lease Site Lease „ „ Lease from public agency to financing entity Lease from public agency to financing entity „ „ Sets up leaseback to public agency Sets up leaseback to public agency „ „ Lease Lease „ „ Lessor is Joint Powers Authority or Nonprofit Public Benefit Corporation rporation Lessor is Joint Powers Authority or Nonprofit Public Benefit Co „ „ Lessee is public agency Lessee is public agency „ „ Important Provisions: Important Provisions: „ „ Lease Payments (Interest and Principal Components) Lease Payments (Interest and Principal Components) „ „ Abatement (Beneficial use and occupancy) Abatement (Beneficial use and occupancy) „ „ Insurance (Liability, Hazard, Title, etc.) Insurance (Liability, Hazard, Title, etc.) „ „ Remedies (Re- -enter and re enter and re- -let) let) Remedies (Re „ „ Restrictions on Use of Facility Restrictions on Use of Facility „ „

Financing Documents – – Financing Documents COP or Lease Revenue Agreements (II) COP or Lease Revenue Agreements (II) Assignment Agreement Assignment Agreement „ „ Assigns rights u der the Lease to the Trustee nder the Lease to the Trustee Assigns rights un „ „ Parties: Public Agency (lessee) and Authority (lessor)… ….Trustee (Assignment Agreement) .Trustee (Assignment Agreement) Parties: Public Agency (lessee) and Authority (lessor) Pay attention to important economic concepts of Fair Rental Value and Useful Economic Life

Financing Documents – – Financing Documents Refunding Transactions Refunding Transactions Escrow Agreement Escrow Agreement „ „ Verification Report Verification Report „ „ Defeasance Opinion Defeasance Opinion „ „