TRANSMITTAL LETTER FOR BOARD MEETING OF JULY 9, 2009
COMMITTEE ON FINANCE
Mr. Richard Lanyon, Executive Director
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Authority to appoint an Underwriting Group at a total fee not to exceed $4,826,250.00 to market up to a total of $600,000,000.00 of General Obligation Capital Improvement Bonds, Limited Tax Series of 2009, of the Metropolitan Water Reclamation District of Greater Chicago
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Dear Sir:
The District intends to sell up to a total of $600,000,000 of General Obligation Capital Improvement Bonds, Limited Tax Series of 2009, in order to fund capital projects initiated since the effective date of the Debt Reform Act and which are subject to its provisions.
Since market interest rates remain near historic lows, and the District has not sold bonds in two years, we expect market reception to be very good and the sale to be completed on excellent financial terms. It is anticipated that all or some portion of the bonds will be issued as taxable Build America Bonds authorized under the American Recovery and Reinvestment Act of 2009, using the Issuer Subsidy option. Under this option, the Federal Treasury will subsidize thirty-five percent (35%) of the District’s interest cost over the life of the Bonds. It is required that the underwriting team be knowledgeable and experienced, exhibit professionalism, and possess the expertise to carry out the required functions correctly and with the necessary timeliness.
Due to the high degree of professional skill required, the matter is not subject to competitive bidding pursuant to Section 11.4 of the Purchasing Act.
After review and consideration of banks and financial institutions believed to be competent in performing the necessary services required for this sale, it is recommended that the following named firms be appointed as specified upon the terms and conditions set forth above: Senior Managing Underwriter (Book-Runner), Mesirow Financial, Inc.; Co-Senior Managing Underwriter, Loop Capital Markets, LLC; and Co-Managing Underwriters: Merrill Lynch & Co. (Bank of America); George K. Baum & Company; William Blair & Company; Cabrera Capital Markets, LLC.; Jefferies & Company, Inc.; Melvin Securities, LLC; Podesta & Co.; Ramirez & Co.; SBK-Brooks Investment Corp.; and Siebert Brandford Shank & Co., LLC.
The total Underwriters’ discount (fee for services) shall not exceed $4,826,250.00. Accordingly, the exact fees may not exceed eighty-one hundredths of one percent (0.0081) of the actual par value of the bonds sold. The fee to the Underwriting Group is $7.50 per $1,000 par amount of bonds sold, a total fee not to exceed $4,500,000.00; Underwriters’ Counsel fees are $0.45 per $1,000 par amount of bonds sold up to $300 million and $0.3375 per $1,000 par amount of bonds sold in excess of $300 million, a total fee not to exceed $236,250.00; and administrative expenses are $0.15 per $1,000 par amount of bonds sold, required to be paid upon the issuance of bonds, a total fee not to exceed $90,000.00. No fees for professional services connected with the bond issuance will be paid unless the sale is consummated.
Accordingly, it is requested that the Board of Commissioners authorize the appointment of the Underwriting Group set forth above at a total fee not to exceed $4,826,250.00 to market up to a total of $600,000,000.00 of General Obligation Capital Improvement Bonds, Limited Tax Series of 2009, of the Metropolitan Water Reclamation District of Greater Chicago.
Requested, Harold G. Downs, Treasurer, HGD:wns
Respectfully Submitted, Gloria Alitto Majewski, Chairman Committee on Finance
Disposition of this agenda item will be documented in the official Regular Board Meeting Minutes of the Board of Commissioners for July 9, 2009