CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION MUNICIPAL DEBT ESSENTIALS IMPORTANT DOCUMENTS AND MANAGING DEBT SERVICE Presented by: Timothy J. Reimers, Esq. QUATEMAN LLP February 3, 2011 Oakland, California
Introduction § Important provisions in financing documents § § § Indenture Loan Agreement Tax Certificate Continuing Disclosure Undertaking Reimbursement Agreement Other Agreements § Questions QUATEMAN LLP 1
Indenture (Trust Agreement, Fiscal Agent Agreement, Paying Agent Agreement, Bond Resolution, Bond Ordinance) Purpose: Provides the terms and conditions of the securities (bonds, certificates of participation, notes. . . ) and for the security pledged for repayment of the securities. Important Provisions: ù Pledge ù Interest rate ù Payment and redemption (prepayment) ù Permitted investment of proceeds ù Terms for additional parity debt (continued…) QUATEMAN LLP 2
Indenture (Trust Agreement, Fiscal Agent Agreement, Paying Agent Agreement, Bond Resolution, Bond Ordinance) Important Provisions (continued): ù Funds and accounts ù Rate covenants ù Prohibitions on senior debt ù Terms of subordinate debt ù Defeasance provisions ù Default and remedy provisions ù Insurance provisions ù Financial guaranty ù Liability, hazard, title. . . ù Compliance with debt policy QUATEMAN LLP 3
Loan Agreement (Financing Agreement, Installment Sale Agreement, Facilities or Project Lease) Purpose: For “conduit” financings, provides the terms and conditions under which the Issuer lends proceeds to the Borrower or otherwise provides for the project being financed. Important Provisions: ù ù ù ù ù Representations, warranties and covenants Restrictions on use Assignment provisions Special covenants Pledge provisions Title provisions Insurance – liabilities, hazard, title, business interruption Abatement provisions (in leases) Remedies ù Re-enter, re-let, termination, damages QUATEMAN LLP 4
Tax Certificate (Tax Regulatory Agreement, Arbitrage Agreement, Land Use Restriction Agreement) Purpose: Provides agreements or certifications required to be made by the Issuer (or Borrower) to satisfy requirements of the Internal Revenue Code for tax exempt treatment of the securities. Important provisions: ù Representations and warranties – rebate and arbitrage ù Sources and uses of proceeds ù Document retention ù BABs filing information ù Various other provisions depending on type of issue – consult bond counsel (tax compliance, private use, refunding. . . ) QUATEMAN LLP 5
Continuing Disclosure Agreement (Continuing Disclosure Certificate) Purpose: Provides undertakings of any obligated person (Issuer, Borrower. . . ) to provide ongoing disclosure. Important provisions: ù Contents of annual reports ù Delivery/timing of annual reports ù Filing of audited financial statements and budgets ù Reporting significant events ù Note – changes in Rule 15 c 2 -12 for post-December 1, 2010 transactions QUATEMAN LLP 6
Reimbursement Agreement (Financial Guaranty Agreement) Purpose: Provides terms of obligation to repay letter of credit bank (or surety provider) amounts drawn on credit facility. Important provisions: ù Representations and warranties ù Waivers ù Remedies ù Letter of Credit ù Covenants ù Financial ù Disclosure QUATEMAN LLP 7
Other Agreements ù Financial guaranty insurance ù Commitment letter ù “Standard” terms and conditions ù Continuing disclosure ù Swap documents ù BABs filing agreement QUATEMAN LLP 8
Documents that do not provide for continuing administrative responsibilities: § Authorizing Document/Resolutions Purpose: Authorizes the issuance and sale of securities, execution and delivery of documents, directs staff to take other actions necessary to complete financing. § Purchase Agreement; Notice of Sale Purpose: Provides for the sale of the bonds to the underwriter or purchaser. But there may be certain obligations for a period of time through and after the underwriting period. § Official Statement Purpose: Provides disclosure to investors and potential investors. § Tips Consider: Debt Calendar and website updates QUATEMAN LLP 9
Typical Questions: § What exactly have we pledged for the repayment of our securities? § How much is our debt service and what does it consist of? § Is our Reserve Fund fully/adequately funded? § We have these sureties, they have been downgraded, are they still good for something? QUATEMAN LLP 10
Questions?
IMPORTANT DOCUMENTS AND MANAGING DEBT SERVICE For additional information, please contact: Timothy J. Reimers, Esq. QUATEMAN LLP, Attorneys at Law Century Park Plaza 1801 Century Park East, Suite 1801 Los Angeles, California 90067 Telephone: 310/556 -1801 treimers@quateman. com www. quateman. com QUATEMAN LLP 12
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