Debt Portfolio Enhancement :: Municipal Debt

With the uncertainty of the capital markets, we are proud to offer more than the basic service, remove the dependency on the continued availability of counterparties and/or bankers to access long-term financing, and provide for portfolio enhancement.

We have associated this with the following:

• Credit risk evaluation
• Critical accounting policies
• Escrow review/enhancement
• Variable rate exposure

Objectives

• Careful utilization of debt to provide a low cost source of capital to fund capital projects and other strategic initiatives in order to achieve the client’s mission and objectives.
• Management of the client’s overall debt level in order to provide appropriate access to capital and to maintain a credit rating deemed acceptable by the board (minimum acceptable underlying rating for a client issue is the single “A” category by major rating agencies).
• Management of the client debt portfolio by balancing the goal of attaining the lowest cost of capital with the goal of minimizing interest rate risk.

Debt Management Strategies

• Fixed vs. variable rate allocation.
• The client will access prevailing market interest rates and the current debt mix to determine whether to issue fixed or variable rate debt.
• Methods of Sale – consider various methods of sale. Negotiated and competitive sales will be considered on an individual transaction basis. Issue size and complexity will be factors in determining which method of sale to pursue. A retail sales approach may be implemented if deemed appropriate for the particular transaction.
• Purchase of Insurance or Credit Enhancement – evaluate insurance and credit enhancement opportunities and utilize them if they are deemed cost effective.
• Refunding Targets – monitor its debt portfolio for refunding and/or restructuring opportunities. Advance refunding transactions must weigh the current opportunity against possible future refunding opportunities. In general, for a stand-alone refunding, an issuer will enter into a transaction that produces greater than 3% net present value savings, with this threshold higher for those transactions with a long escrow, such as advance refundings. The savings threshold can be less for refundings combined with new issues or other refundings, or for business reasons such as freeing up a reserve fund.