#1A PROGRAM BROUGHT TO YOU BY: JOSH MANDEL TREASURER OF OHIO ER OF THE STATE OF OHIO TREASURER THE SEAL OF WITH GOD POSSIBLE ALL THINGS ARE CPIM CENTER FOR PUBLIC INVESTMENT MANAGEMENT FIN 162: Who's Who - Roles in a Bond Issue#2Presenters Lisa Eisenberg, Deputy Director of Debt Management, Ohio Treasurer Josh Mandel Bethany Pugh, Managing Director, PFM Financial Advisors LLC TREA THE TR EASURER THEREOF WITH GOD OF STATE OF * OIHO ALL THINGS ARE POSSIBLE CPIM Academy 2018// FIN 162 pfm 2 ]#3Participants to the Transaction Team Escrow Agent Trustee Registrar/ Paying Agent/ Trustee Counsel Financial/ Feasibility Consultant Every issue As needed Financial Advisor Bond/Tax Counsel Issuer Underwriter/ Lender Verification Agent/ Accountant Credit Enhancers Rating Agencies Moody's S&P Fitch CPIM Academy 2018// FIN 162 3 )#4Issuer and Their Counsels Issuer - Body with the authority to issue bonds City/County/State and their Agencies In certain structures, can serve as the conduit between the borrower and investors Bond Counsel - Every bond issue must be reviewed by a lawyer or law firm • The legal opinion is authorization of the debt and covers two main issues: Ensures the bonds are legal, valid, and binding obligations of the issuer Verifies the tax status of the debt (if interest is exempt from federal, state, or local taxes Other Counsel - May include special tax counsel, disclosure counsel and issuer's counsel Special counsel may be necessary for specific issues that are more complex and diverse than standard offerings. Also may be used to ensure consistency for regular issuers. CPIM Academy 2018// FIN 162 4#5Choosing Legal Counsel Experience • Prior transactions for issuer • Transactions with comparable issuers • Particular expertise for more complex transactions Listed in The Bond Buyers Municipal Marketplace Directory (the "Red Book") Conflicts 5) CPIM Academy 2018// FIN 162#6. Municipal Advisors Advises the issuer throughout the bond issue process • Debt structuring • Assist in evaluation and preparation of documents relating to the marketing and issuance of bonds Ratings process Price negotiation Owes a fiduciary duty to issuer 6) CPIM Academy 2018// FIN 162#7. . Choosing Municipal Advisors Selection Request for Qualification (RFQ) • Quantity Independent Registered Municipal Advisor (IRMA) Considerations Experience • Resources and Quantitative Capabilities. • References CPIM Academy 2018// FIN 162 ( 7 )#8Underwriters Securities dealer who helps issuers bring bonds to market by purchasing the bonds and reselling them to investors. Due Diligence on disclosure Assist in development of financing plan • Provide pricing guidance • Markets bonds Underwriter assumes a financial risk and expects to make a profit on the transaction Does not owe a fiduciary duty to issuer CPIM Academy 2018// FIN 162 ( 8 )#9Choosing Underwriters Different Approaches Regularly work with one or more underwriters Pool of qualified underwriters via RFQ Multiple pools based on credit or role (senior manager pool and co- manager pool) • RFP on a deal-by-deal basis Syndicate size 9) CPIM Academy 2018// FIN 162#10Choosing Underwriters cont. Considerations • Experience ■ Staffing plan • Resources ■ Size of salesforce and distribution capabilities ■ Underwriting capacity (and demonstrated willingness to underwrite unsold balances) • Other factors depending on issuer priorities ■Retail distribution Footprint ■ Ownership status 10 リ CPIM Academy 2018// FIN 162#11. Trustee/Escrow/Verification Agents Trustee Financial institution with trust powers given fiduciary powers by a bond issuer to enforce the terms of a bond indenture Ensures bond interest payments are made and protects the interests of the bondholders in the event of default Roles Specific to Refunding Bonds Escrow Agent - Serves as custodian of the funds and holds securities to pay debt service on refunded bonds Verification Agent - Verifies cash flow sufficiency to the call date of the escrowed securities 11 CPIM Academy 2018// FIN 162#12. Rating Agencies/Credit Enhancement Rating Agencies (Moody's, S & P, Fitch, and Kroll) rate bond issuers to categorize credit worthiness and proximity to default Ratings play a critical role in the minds of market participants and are perceived as a guide of an Issuer's credit worthiness Credit ratings play a significant role in broadening the investor base for an issuer Credit Enhancement - Supports an Issuer's credit in exchange for a fee or a premium, in the form of enhancement such as bond insurance or a letter of credit Ohio Market Access Program Moody's Aaa Aal Aa2 Aa3 A1 A2 A3 Baal Baa2 Baa3 S&P/Fitch AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- 12 CPIM Academy 2018// FIN 162#13. • Rating Agencies Approach Agency Selection Considerations Optimal Marketing Number of ratings Market acceptance of rating agency Agency's credit methodology General Obligation Bonds Special Tax Revenue Utility Revenue Presentation Formal Meeting & Presentation or Call Participants Prepared Materials Pricing . Fee schedule Frequent Issuer Discounts. 13 CPIM Academy 2018// FIN 162#14Questions? Lisa Eisenberg, Deputy Director of Debt Management, Ohio Treasurer Josh Mandel Bethany Pugh, Managing Director, PFM Financial Advisors LLC WITH GOD A THE THE SEAL TRE ★ OIHO ALL THINGS ARE OF POSSIBLE STATE OF TREASURER pfm 14 CPIM Academy 2018// FIN 162#15MyCPIM Password BONDROLES 15 CPIM Academy 2018 // FIN 162