New Issues - Municipal Underwritings Flashcards
Muni GO bonds are generally required to be sold on a ______ basis
competitive bid
Revenue and industrial rev bonds are usually sold on a _______ basis
negotiated
In order to issue, a municipality first contacts its _____ and _____
financial adviser and bond counsel
The bond counsel will draw up the _____ contract, the ________, and render an ______
bond contract, the trust indenture, and render an opinion
To solicit bids, the municipality publishes a ________
Offer of Notice of Sale
The Net Interest Cost is the ______
arithmetic mean of the interest rates - lowest one wins
True Interest Cost is a pricing method that takes into account the ______
present value of each interest payment
A good faith check for a muni issue is typically ____ of the issue amount
2%
The issuer is responsible for providing the _____ and ____ copies of the _______
legal opinion, and 500 copies of the “Official Statement” (ie a prospectus)
Bond years =
number of bonds * years to maturity
Years Avg Life =
Total Bond Years / Total Number of Bonds
In an “Eastern” muni syndicate, if there are remaining bonds to be sold, each member is responsible for_____
their % share of the remainder - doesn’t matter if they sold all their allotment
Total Interest Paid by Municipality =
bond years x interest rate (for each maturity, then summed)
Net Interest Cost (for Munis) =
Total interest -/+ premium/discount / bond years
Pre-sale orders are handled first and are filled at the “Net” price (the reoffering price). T/F
True
“Group net” orders are filled after any _____ orders have been filled.
Pre-sale orders
“Net designated” orders are used by _______ investors and designate which ________ get the profits
used by institutional investors, designate which syndicate members get the profit
The order for filling orders for munis is:
PGDM:
- Pre-order
- Group
- Designated
- Member takedown
A manager will close the syndicate no later than _____ after the bid is won
60 days
A abnormally large “visible supply” indicates that rates will likely ______
rise
The visible supply includes short terms muni notes. T/F
False, it does not include ST notes
Placement ratio =
dollar amount of bonds sold by syndicates / dollar amount of bonds issued (over $1,000,000 issues only)
Muni bond indices
- Bond Buyer 40 (25 year avg mat)
- Bond index 20 (A or better, 20 yr maturity)
- 11 Bond index (AA or better)
- Revdex 25 bond index (rev bonds, 30 yr, A or better)
In a competitive bid offering, do you need to disclose the spread and/or underwriters who are participating?
NO and NO
In a negotiated offering, what do you need to disclose?
- the spread
- the initial offering price of each maturity
- you DO NOT need to disclose the underwriters or how much of the total offering they are selling
