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Debt and Technology: Using the Internet to Competitively Market Bonds. Alternative forms of Issuing Long Term Debt. Bank Loan Bond Pool Bond Issue. Factors in Determining which Long Term Debt Alternative to Select. Size Term Interest rate exposure
Using the Internet to Competitively Market Bonds
Conditions Favoring A Competitive Sale
Conditions Favoring a Negotiated Sale
General Obligation or Strong System Revenue
Project Supported Revenues
Security Structure (for Revenue Bonds)
Conventional Resolution and Cash Flow; Rate Covenant and Coverage
Unusual or Weak Covenants Subordinated Debt
Traditional Serial and Term, Full Coupon Bonds
Use of new structures, or Derivative Products and Structure to Attract Particular Investors
"A" or better
Below Single "A"
Weak but Improving, or Under Stress
Type of Organization
Broad-Based General Purpose Borrower
Special Purpose, Independent Authority
Frequency of Issuance
Regular Borrower in Public Market
New or Infrequent Issuer
Active Secondary Market with Broad Investor Base
Little or No Institutional Awareness of Issuer, Historical Antipathy
Well-Known, Stable Issuer
Issuer Experiencing Significant Financial, Legal or Other Problems
Stable, Predictable Market
Volatile or Declining Market
Supply and Demand
Strong Investor Demand, Good Liquidity, Light Forward Calendar
Oversold Market, Heavy Supply
Participation in Sale Bonds
Broad Market Participation Desired for Sale of Bonds
Desire to Direct Business to DBE or Local/Regional Firms
Stimulation of Investor Interest
Broad Market Participation Desired for Purchase of Goods
Desire to Direct Business to Local/Regional Investors
Source: "Guide to Effective Debt Management" Published By:National Government Finance Officers Association.
If a Bond Issue is the Alternative selected, a determination needs to be made whether the bonds are placed in the market using either the competitive or negotiated method of sale.
The following checklist should provide some guidance on which method of sale to employ.
If a competitive sale is selected, a determination is made whether the bonds should be sold using the traditional approach of obtaining bids by facsimile or over the Internet.
Some points for discussion regarding the decision include:
At the established auction bidding date and time, underwriters submit their bids on the Internet bidding website for: