Municipal Reinvestment :: Investment Bidding Process & Documentation

Decision-making Process

CDR analyzes the various investment structures appropriate in the current market and prepares a synopsis of these alternatives for an issuer’s review. This will be based on investment objectives and guidelines. CDR determines in conjunction with the issuer and the financing team the optimal strategy that is best suited for a transaction. The strategy will be affected by:

• Maturity
• Credit Considerations
• Liquidity Needs
• Current Portfolio Composition
• Risk Tolerance
• Positive vs. Negative Arbitrage

CDR prepares oral and written presentations, as requested by our municipal reinvestment clients, to determine the appropriate investment vehicles. We assist in coordinating all necessary meetings and conference calls, and participate in meetings as needed or requested by an issuer.

Procurement

After a structure is approved, CDR will serve as bidding agent and provide the following services:

• Prepare the request for bid specifications and necessary documentation that includes bid parameters.
• Provide a preliminary list of potential bidders who meet the criteria.
• Disseminate the bid to potential bidders.
• Coordinate actual receipt of bids at the designated time and review to ensure conformity with the specified request for bids. After the bids are received, CDR will prepare a bid summary sheet detailing each provider, their credit rating, the rate bid and any deviations to the request for bids. A formal bid process with multiple competitive providers ensures that a fair price is obtained.
• After review of all the bids received with the issuer and members of the finance team, and upon the collective decision of the winning provider, CDR contacts the provider to award the contract.
• Review the contracts or documents submitted by the selected provider to ensure conformity with underlying request for bid, and work with the provider, the issuer and the finance team to execute in a timely manner.

Investment Documentation

Documents for investment agreements are individually negotiated, and are based on the provisions contained within the bid specifications and deviations submitted with the winning provider’s bid. Each provider begins with their own form of agreement. The agreement is then circulated to the working group for comment. CDR is always available to utilize our extensive market knowledge to review and negotiate agreement terms to the maximum benefit of the issuer. We have frequently discovered discrepancies between the terms stated on the bid specs and those listed in an agreement that have been to the detriment of the issuer. In such cases, we have worked with the provider and working group to have them modified to the issuer’s benefit.

In addition to the agreement, an enforceability opinion is typically supplied by counsel to the provider (including a foreign enforceability opinion in the case of a domestic branch of a foreign bank) that is acceptable to the issuer, trustee and counsel. If the investment consists of a repurchase agreement, a custodian agreement and perfected security interest opinion will be supplied as well.