TRANSMITTAL LETTER FOR BOARD MEETING OF OCTOBER 3, 2024
COMMITTEE ON PROCUREMENT
Mr. Brian A. Perkovich, Executive Director
Title
Authorization to execute a bond purchase agreement for Contract 20-RFP-04 Professional Underwriting Services for District Bond Sales with Barclays Capital Inc., and to appoint Barclays Capital Inc. as Senior Managing Underwriter and Book-runner; Cabrera Capital Markets LLC as Co-Senior Managing Underwriter; and Backstrom McCarley Berry & Co., LLC, Blaylock Van, LLC, Loop Capital Markets LLC, and Mischler Financial Group, Inc., as Co-Managing Underwriters, in a total amount not to exceed $375,000.00 in connection with the sale of up to a total of $500,000,000 of General Obligation Capital Improvement and Refunding Bonds of the Metropolitan Water Reclamation District of Greater Chicago, Accounts 401-50000-767300 and 767400
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Dear Sir:
The District intends to sell new money and refunding bonds (taxable and tax-exempt) in the coming months. The new money component will be approximately $300 million, and the refunding bonds could approximate $200 million on the date of the sale depending upon market conditions. The total bond sale requirement of an estimated $500 million would be sold in one sale on the same date. Refunding candidates include the District’s 2014C bonds and a tender offer of the District’s 2021 Series E and F bonds. The size and structure of the bond sale will be determined with the assistance of the Underwriters and Financial Advisors, based upon the market interest rates, investor cash positions, supply of bonds for sale, liquidity of the market, and other conditions.
Underwriters assist the District in structuring, marketing, selling, and underwriting debt. 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.
Per the conditions of Contract 20-RFP-04, the Senior Managing Underwriter and Co-Managing Underwriters appointed for each bond sale during the five-year period are removed from the respective eligible list for remaining bond sales executed during the five-year period.
Additionally, a best and final offer (BAFO) on cost to serve as Senior Managing Underwriter is required for each bond sale. On June 26, 2024, a BAFO request was issued to the remaining firms eligible to provide Senior Managing Underwriting Services, and responses were received by July 16, 2024. These scores were added to the technical score earned by each firm in 2020 to form a composite evaluation ranking for the 2025 bond sale. Barclays Capital Inc. was highest-ranked overall by this composite evaluation and is recommended to act as Senior Managing Underwriter and Book-runner for the 2025 bond sale. Should a tender offer be executed as part of this sale, the Senior Managing Underwriter will also be engaged to act as the Dealer Manager for a separate fee based primarily on the amount of bonds tendered.
The Co-Senior Managing Underwriter and Co-Managing Underwriters are recommended from the firms remaining on the eligible list based upon their technical score and the District’s aspirational participation goals for Minority-Owned (MBE), Women-Owned (WBE), and Veteran-Owned (VBE) business enterprises. Their compensation is based on the Senior Managing Underwriter’s BAFO cost proposal, so no separate cost proposals are requested. Cabrera Capital Markets LLC is recommended to act as Co-Senior Managing Underwriter for the 2025 bond sale, and Backstrom McCarley Berry & Co., LLC, Blaylock Van, LLC, Loop Capital Markets LLC, and Mischler Financial Group, Inc., are recommended to act as Co-Managing Underwriters.
For each bond sale, the District shall aspire to award a minimum of 30% of the work and services required by the RFP to one or more MBE or WBE firm(s) and a minimum of 3% of the work and services to one or more VBE firm(s). The Diversity Section has reviewed the proposed underwriter appointments for this bond sale and concluded that the group identified is in accordance with the RFP requirements.
The underwriters’ discount (fee for services) is proposed to be fifty cents ($0.50) per $1,000 principal amount of bonds sold up to $500,000,000. The total fee is therefore not to exceed $250,000.00, to be apportioned 45% to the Senior Managing Underwriter/Book-runner, 23% to the Co-Senior Managing Underwriter, and 8% to each Co-Managing Underwriter. Administrative expenses are proposed to be twenty-five cents ($0.25) per $1,000 principal amount of bonds sold, a fee not to exceed $125,000.00. The total fee to the underwriting group is not to exceed $375,000.00.
Accordingly, it is requested that the Board of Commissioners direct the Chairman of the Committee on Finance or other duly authorized officer of the Board of Commissioners, and the Treasurer of the District, to execute a bond purchase agreement with Barclays Capital Inc., and to appoint Barclays Capital Inc. as Senior Managing Underwriter and Book-runner; Cabrera Capital Markets LLC, as Co-Senior Managing Underwriter; and Backstrom McCarley Berry & Co., LLC, Blaylock Van, LLC, Loop Capital Markets LLC, and Mischler Financial Group, Inc., as Co-Managing Underwriters, in a total amount not to exceed $250,000.00 per Section 11.4 of the Purchasing Act. Funds will be paid from the bond sale proceeds Accounts 401-50000-767300 ($225,000.00) and 401-50000-767400 ($150,000.00). Fees as noted above will only be disbursed if and when the transaction is completed.
Requested, Steven J. Lux, Treasurer, SJL:WNS:vb
Recommended, Darlene A. LoCascio, Director of Procurement and Materials Management
Respectfully Submitted, Marcelino Garcia, Chairman Committee on Procurement
Disposition of this agenda item will be documented in the official Regular Board Meeting Minutes of the Board of Commissioners for October 3, 2024
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