with Private Placements May 5, 2016 Panelists Neal Skiver Senior - PowerPoint PPT Presentation

Reaching the Checkered Flag with Private Placements May 5, 2016

Panelists Neal Skiver Senior Vice President Renewables & Energy Infrastructure George K. Baum & Company Matt Morrell Managing Director Fixed Income Sales & Trading Piper Jaffray & Co. Michael Juby Director First Tryon Advisors

Moderators Sherry Villafane Vice President Government & Nonprofit Financing NBH Capital Finance David Roeder SVP, Managing Director Public Finance Group Sterling National Bank

Outline Anecdotal Evidence of Increased Private Placements Bond Market Historical Evidence Rationale for Increased Private Placements Implications for AGLF Members Role of Placement Agent or Lease Broker/Consultant Matters to Consider Financial Advisors and Placement Agents Question & Answer Session

Anecdotal Evidence of Increased Private Placements Split Collateral Financings Sales-Tax Revenue Bonds Direct Placements, instead of Commercial Paper Direct Placements, instead of Variable Rate Demand Obligations Pari-Passu Collateral with Multiple Lenders Refundings of Public COPs

Market Data Evidencing Increased Private Placements Private Total % Private Year Placements Issuance Placements 2006 4.7 386.0 1.22% 2007 5.0 429.2 1.16% 2008 3.1 389.3 0.81% 2009 3.0 409.6 0.74% 2010 2.8 433.1 0.65% 2011 9.8 295.2 3.31% 2012 12.4 382.4 3.25% 2013 22.2 335.2 6.63% 2014 24.2 339.1 7.15% 2015 25.5 403.1 6.32% $ Billions, Source: SIFMA

Rationale for Increased Private Placements · Disclosure Requirements / Legal Jeopardy · No Official Statement or Rating Required · Structural Flexibility & Benefits · Shorter Timeline · Rate-Lock Timing / Forward Rate-Lock · No Debt Service Reserve Requirement · Lower Costs of Issuance · Lower Yield (in some cases) · Issuer Perspectives

Implications for AGLF Members More Funding Opportunities · Higher Dollar Amount Loans · Being Responsive within Your Funding Parameters - Within Term Limits - Within Pricing Constraints - Within Collateral Parameters More “Club” Lending Opportunities · Collaborative Efforts with AGLF Members More Interaction with Placement Agents · AGLF Members without Capital Markets Function

Role of Placement Agent or Lease Broker/Consultant · Structuring Transactions · Identifying Lenders · Pricing of Aggregate Loan and Individual Lender Schedules · Identifying Other Deal-Team Members · Shepherding the Transaction · Assisting in Closing Matters

Matters to Consider – Security Interest Specific Collateral - Lenders have Separate, Identified Collateral Pari Passu Collateral - Lenders share an Undivided Collateral Interest - Additional Debt Secured by Same Collateral Inter-Creditor Agreement - Details how Lenders (and Trustee) Interact Default Declaration & Remedies - Individual Lenders or Trustee

Matters to Consider – Agency Responsibilities · Lead Bank Relationship · Directing Consents - Simple Majority, 2/3rds, or Unanimous Consent · Escrow Agent - Do all Lenders approve Draws, or does Trustee · Paying Agent · Independent Agent, or Club Members Fulfilling Dual Roles

Matters to Consider – Counsel Representation & Doc Review · Retained Outside Counsel - Individual Lender Representation, or Club Representation · Validity and Tax Counsel - Club Approval and Interaction · Collaborative Effort re: Doc Review - Potential for Process to be Complicated and Slow

Matters to Consider – Rationale for Loan Treatment · No Official Statement · No CUSIP · Physical Bond versus DTC Registered · No Rating · No Small Denominations · Limited Restrictions re: Transferability · No Mark-to-Market Requirement · Representation that Bank is treating as a Loan · Name (i.e. “Bond”) not Dispositive · Lender Representation Letter / “Big Boy Letter” Talk to lender’s counsel for better understanding and guidance.

Financial Advisors working with Placement Agents Potential Problem: F/A providing Advice and Soliciting Financing Solution: F/A provides Advice, Placement Agent Solicits Financing Dual Roles - A Word of Caution In the Matter of Central States Capital Markets LLC; Mark Detter; David K. Malone; and John D. Stepp In the first-ever G-23 case, a firm named Central States and certain individuals settled SEC charges in connection with MSRB Rule G-23. The same persons acted as financial advisor and underwriter to a municipal issuer while dually employed at separate firms. The individuals were cited for violations of G-17 (fair dealing), G-23 (acting as an underwriter and a financial advisor on the same issue) and breach of fiduciary duty for not disclosing the conflicts of interest is serving in both roles. One of the individuals was barred from the industry for 2 years, another for 1 year, and another was barred from being a supervisor for 6 months. All received individual fines and Central States was fined and sanctioned as well. While this case was egregious, it is notable that the persons involved were temporarily suspended from the business for a meaningful period of time.

Q&A Time