- 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
