8 CCR 1508-2-1.9 - Methods of Sale
It is in the State's best interest to sell its Financial Obligations using the method of sale that is expected to achieve the best sales results, taking into account both short-range and long-range implications. In order to ensure that the State's best interests are being met, it is important for the State Treasurer to be actively involved in any method of sale.
A.
Factors for Determining Method
of Sale.
(1) Considerations which
support a competitive sale process include, but are not limited to the
following: the Financial Obligation has an unenhanced credit rating favorable
to the market; the Financial Obligation is appropriately sized to attract
investors without a concerted effort; and interest rates and other economic
factors are stable and market demand is strong.
(2) Considerations which support a negotiated
sale process include, but are not limited to the following: the Financial
Obligation is not large enough to attract market interest; market timing will
be a critical factor in garnering the lowest possible interest rate; the
financing requires a complex or innovative structure; the market has concerns
about the credit quality of the Financial Obligation; and the market is
unfamiliar with the project, the structure of the financing or the revenues
pledged for annual repayment.
B.
Initiating a Competitive
Sale. The Official Notice of Sale (the "Notice") will be published
in the most appropriate method of advertisement, such as MSRB's EMMA website.
The Notice will announce the State's intent to sell Financial Obligations and
will contain references to relevant security and structural information that
interested bidders may require. The Notice will clearly indicate the
permissible discounts, premiums and basis of award, including additional
requirements to acknowledge MSRB and SEC compliance.
C. Parameters for Underwriter Selection for a
Negotiated Sale. When the State Treasurer determines that a negotiated sale is
in the best interests of the State, the State Treasurer may retain underwriters
to execute the sale of Financial Obligations.
(1)
Co-Managers and Selling
Groups. If underwriter co-managers and/or a selling group are deemed
appropriate to the sale of Financial Obligations, those underwriters will be
engaged by the State Treasurer. Underwriters will be selected by an open and
competitive bidding process.
(2)
Pricing and Allocation of Sales.
(a) The negotiation of terms and conditions
will include, but not be limited to: prices, interest rates, underwriting or
remarketing fees and commissions, based on prevailing terms and conditions in
the marketplace for comparable issuers, lessees and obligors and similarly
secured and rated Financial Obligations in addition to the State's recent
experience.
(b) If more than one
underwriter is included in the sale of the Financial Obligation, the State
Treasurer will establish the general guidelines of the allocation of fees,
liability and underwriting in a manner consistent with the objectives of the
State.
(c) Criteria to be used in
determining the allocation of Financial Obligations sold by selected
underwriters will include, but not be limited to:
(i) Demonstrated performance in the sale of
previous issues of financial obligations;
(ii) Demonstrated commitment to the overall
goals of the State's financing programs.
(3)
Underwriter's Responsibilities
for a Negotiated Sale. Contemporaneous with the execution of a
purchase contract for Financial Obligations, the senior manager of a financing
will:
(a) Provide for the fair allocation of
Financial Obligations to underwriters and selling group members, consistent
with the previously negotiated terms and conditions of allocation, as
referenced in any related agreement among underwriters;
(b) Provide affirmation of compliance with
all current MSRB regulations; and
(c) Agree to submit to the State a complete
and timely account of all orders, allocations and underwriting activities
related to the sale of Financial Obligations under its management.
D.
Parameters and Criteria for a Private Placement. As
part of the sale process, the State Treasurer may determine it is in the
State's best interest to authorize a private placement of the Financial
Obligation, based upon the following considerations: Size of issuance; limited
and simple project scope and collateral; little market interest in small dollar
amount of financing; interest rate; covenants; non-market redemption
provisions; and savings associated with normal closing transaction fees for
financial professionals.
In a private placement, the State Treasurer will prepare and distribute a request for proposals from financing companies and financial institutions and select the bid most advantageous to the State.
Notes
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