i.4.1.2 Issuance Phase

During the issuance phase, a public agency may wish to retain the following municipal market professionals as they ready their debt for the market:

MUNICIPAL ADVISORS – During the sale of the debt a municipal advisor may help to evaluate the bids provided by underwriters, analyze cash flow calculations, and manage the bond closing process. Immediately following the sale of the debt the municipal advisor may monitor how the debt is trading in the market to determine whether the bond was accurately priced in the initial sale to underwriters.

UNDERWRITER – During the sales process the underwriter executes the bond purchase agreement to sell the debt and settle the transaction.

LEGAL COUNSEL – Legal counsel generally prepares the indenture, loan agreement, or other documents providing for the issuance or repayment of the debt and works with the issuer to prepare appropriate disclosure documents. In the case of tax exempt debt, legal counsel may draft a tax certificate that confirms the issuer’s expectations and affirms the issuer’s intent to use the proceeds of the debt in compliance with federal and state tax laws. Legal counsel may also submit other required reports, including a report to CDIAC on the sale of the debt.

TRUSTEE – With many forms of debt, there is a need for a third party to receive and distribute the proceeds of the debt sale and payments of principal and interest to end market investors. This role is performed by a trustee. The trustee acts a fiduciary in the investors’ interests to enforce the terms of the agreements. The trustee may also hold and invest funds associated with the debt, including reserves and unspent debt proceeds. The trustee also maintains records to identify current investors. In some circumstances, these third parties may be called fiscal agents or paying agents when they are performing similar but more limited duties, particularly with regard to the investment of funds.

CREDIT ENHANCERS – In the case of lower rated debt offerings, the interests of end market investors are secured against loss or default by credit enhancers. This is a form of credit insurance that intends to (a) make principal and interest payments in the event the issuer cannot and (b) lower the issuer’s borrowing costs.

VERIFICATION AGENT AND ESCROW AGENT – In a refunding, the issuer replaces an outstanding debt with a new issue of debt. A verification agent validates that cash flows from the new debt will be sufficient to repay the old debt. The escrow agent serves as a custodian of funds and holds the old debt that supports repayment of the new debt.