Bond Accountability Commission 2 Recommendations Page 16
• Bond insurance or other credit enhancement is unavailable or not cost-effective. • The structure of the bonds has features such as a pooled bond program, variable rate debt, deferred interest bonds, or other bonds that may be better suited to negotiation. • The issuer desires to target underwriting participation to include disadvantaged business enterprises (DBEs) or local firms. • Other factors that the issuer, in consultation with its financial advisor, believes favor the use of a negotiated sale process. One of the ironies of the municipal securities market is that large numbers of issuers that otherwise are frugal and that carefully evaluate costs and money-saving alternatives in making even relatively small purchases, nevertheless choose to ignore strong evidence that competitive bidding produces better pricing in certain securities financings of significant size. That is especially true in connection with the issuance of what might be described as “commoditized” securities. In general, commoditized securities, discussed further below, are those that have strong easily recognizable credit support, that incorporate standardized terms, and that carry satisfactory ratings. Commoditized securities do not require special premarketing sales efforts or extensive explanations by underwriter sales personnel to potential investors because the securities are readily recognizable to investors.
Published on May 14, 2014