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The attached resolution appoints a pool of bond undervyriting firms to assist the System in
restmcturing its currently outstanding bonded debt and in financing its proposed capital
improvement programs.
• The System currently has $728,455,000 of long term, fixed rate debt outstanding.
Schedule 1 depicts the annual principal and interest requirements for this debt until
maturity.
The Series 1992 bonds, which total $292,020,000 or 40% of the amount outstanding,
become callable on May 15, 2002.
The callability of these bonds plus the current favorable interest rate markets provide
an opportunity to restmcture the System's outstanding debt in anticipation of
financing the projected capital program requirements over the next ten years of over
$2 billion. Schedule 2 depicts the projected capital improvement programs for this
period of time by core business.
Preliminary analyses indicate that the restmcturing would result in a present value
savings to the System.
• Appointment of the pool of underwriting firms at this time would allow for
completion of a transaction as early as September, 2001 should changes in the credit
markets dictate.
Based on the results of the evaluation process, the following pool of underwriting
firms is recommended:
SMWBE Firms
Apex Pryor Securities
Samuel A. Ramirez & Co., Inc.
Siebert Brandford Shank & Co., L.L.C.
Southwestem Capital Markets, Inc.
• The recommended pool consists of fourteen firms. The specific syndicate for
each individual transaction would consist of eight to twelve firms, depending
upon the size and complexity of each transaction.
• Firms not part of the initial pool recommended above, may be considered for
future inclusion based on interest in providing service to the System, as may
be evidenced by submission of timely and meaningful reports and analyses.
Appointment of a Pool of Bond Underwriting Firms Agenda Item No. ^^
Page 3
• Based on the result of oral interviews conducted May 30 with the six national
firms, Salomon Smith Bamey, Inc. is recommended to serve in the capacity
as senior manager on the initial transaction. Salomon Smith Bamey, Inc. is
recommended for this role due to their superior approach and sfrategy to
restmcturing the System's outstanding debt and plan of finance to address the
System's capital improvement needs over the next several years.
The Management Services Committee was briefed on the approach and calendar of events
for this matter.
FINANCIAL IMPACT:
Once the size and stmcture of the bond issue is finalized and a sale date is determined, a
purchase agreement will be negotiated with the senior manager. Based on recent experience
in the market place estimated underwriting fees could range from $4.50 to $6.00 per bond.
SUPPLEMENTARY COMMENTS:
The System's co-financial advisory team of Estrada Hinojosa and First Southwest assisted
staff in the formulation of this recommendation, with Estrada Hinojosa serving in the lead
role.
Nineteen proposals were received by the due date of May 18, 2001.
The proposals were evaluated by three staff members from SAWS, two representatives from
Estrada Hinojosa, and one representative from First Southwest.
The City's Public Utilities Supervisor was apprised and informed of this process and
recommendation.
Appointment of a Pool of Bond Underwriting Firms Agenda Item No. 33
Page 4
Ralph E. Hub;
Chief Financial Officer
APPROVED:
Eugene E. Habiger,
General, USAF (Ret.).
T
President/Chief Executive Officer
RESOLUTION NO.
WHEREAS, oral interviews have been conducted as a basis for designating one
of the underwriting firms to serve in the role as senior manager of the initial transaction
to be completed; and
01-171
WHEREAS, guidance is necessary to provide an orderly process for
maintaining a quality and effective pool of underwriting firms; and
WHEREAS, the San Antonio Water System Board of Tmstees desires to (i)
appoint a pool of underwriting firms consisting of A.G. Edwards & Sons, Inc., Apex
Pryor Securities, Bear Steams & Co., Inc., Dain Rauscher, Incorporated, Goldman Sachs
& Co., JPMorgan Chase & Co., M. E. Allison & Co., Inc., Morgan Keegan & Company,
Inc., Morgan Stanley & Co., Incorporated, Samuel A. Ramirez & Co., Inc., Salomon
Smith Bamey, Inc., Siebert Brandford Shank & Co. L.L.C, Southwest Securities, Inc.,
and Southwestem Capital Markets, Inc. to assist the System in the restmcturing of its
currently outstanding bonded debt and providing financing for fiiture capital
improvement programs, (ii) designate Salomon Smith Bamey, Inc., in the role of senior
manager for the initial transactions conducted, (iii) direct the President/Chief Executive
Officer to develop a set of procedures outlining management and administration of the
underwriter pool; now therefore:
1. That the following firms are hereby appointed to serve as the pool of underwriting
firms to assist the System from time to time in the issuance of debt:
2. That Salomon Smith Bamey, Inc., is hereby designated to serve in the role of
senior manager for the initial debt offering related to the restmcturing of existing debt
and financing for capital improvements of the System.
4. It is officially found, determined and declared that the meeting at which this
resolution is adopted was open to the pubhc, and that public notice of the time, place and
subject matter of the pubhc business to be conducted at such meeting, including this
resolution, was given to all as required by the Texas Codes Annotated, as amended. Title
5, Chapter 551 Government Code.
5. If any part, section, paragraph, sentence, phrase or word of this resolution is for
any reason held to be unconstitutional, illegal, inoperative or invalid, or if any exception
to our limitation upon any general provision herein contained is held to be
unconstitutional, illegal, invalid or ineffective, the remainder of this resolution shall
nevertheless stand effective and valid as if it had been enacted without the portion held to
be unconstitutional, illegal, invalid or ineffective.
M. Mayor, Chairman
ATTEST: