Underwriting Outline

General Obligation Bond

• municipality issue
• backing is municipality's taxing power
• competitive bid process to select underwriter
• Bond Buyer, advertisement to underwriters
• notice of sale, municipality asks underwriters to bid to work on issue
• small issue-municipality will use a local paper and local bank can underwrite issue

Notice of sale

• maturity dates of bonds
• range of acceptable interest rates
• call features
• call calculation-net interest cost method or true interest cost method?
• issuer outlines good faith deposit 

Competitive bid process

• potential issuers submit bids 
• how much $ issuer will get paid for bonds
• interest cost/year
• total interest cost issuer pays-either net interest cost or true interest cost
• new issue worksheet, bid sheet in Bond Buyer, outlines bid steps
• bids must be delivered on a certain date-often arrive right before deadline
• issuer opens bids, chooses based on lowest interest cost and highest amount $ to issuer
• issuer may expect underwriter to sell a minimum amount of bonds

The City of San Francisco has issued an advertisement stating that it is accepting bids for a $40 million general obligation bond with maturities from 2001 through 2020. The advertisement is called

• a notice of sale
• advertisement- issuer wants to to find an underwriter
• tombstone, ad by underwriting syndicate, announcement 

Determining the bid

• issuer give 2%-3% range underwriters have to keep interest
• underwriters bid on scale, interest rate + price helps decide investor yield 
• Bond Buyer has  interest rates of long term bonds