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JUNE 12, 2004. CAUBO Annual Conference CONSORTIA BORROWING Saskatoon,Saskatchewan. Agenda. OSBFC Story - Our Team OSBFC’s Process Benefits of OSBFC Costs. “ SIGNIFICANT FINANCIAL BENEFITS TO THE SECTOR ” $200,000,000 (conservatively!!!). “ROWING WITH THE PEOPLE”. 25 BOARDS 25 CEO’S

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june 12 2004
JUNE 12, 2004

CAUBO Annual ConferenceCONSORTIA BORROWINGSaskatoon,Saskatchewan

agenda
Agenda
  • OSBFC Story - Our Team
  • OSBFC’s Process
  • Benefits of OSBFC
  • Costs
rowing with the people
“ROWING WITH THE PEOPLE”
  • 25 BOARDS
  • 25 CEO’S
  • 25 CFO’S
  • 235 TRUSTEES
  • 7 INVESTMENT BANKS
  • 3 LEGAL FIRMS
  • 2 MINISTRY’S
  • ONTARIO FINANCING AUTHOURITY

SO FAR……..

how did we get started
HOW DID WE GET STARTED?
  • April 1998 – RESTRUCTURING OF BOARDS
  • Seed $ from Ministry of Education
  • Set up Catholic School Board Services Corporation; spun off OSBFC
  • Initiatives:
    • Purchasing
    • Construction, Facility & Energy
    • Utilities
    • Employee Benefits
    • IT
    • Consultants
our story our team
Our Story - Our Team
  • Financing Structure Description
    • Ontario School Boards Financing Corporation (“OSBFC”) was formed as a vehicle to issue debt on behalf of Ontario School Boards
    • OSBFC is a non-share capital, not-for-profit, special purpose corporation
    • Each participating Board issues a debenture to OSBFC representing its debt obligation
    • The amount of the underlying debenture issued by each participating Board is based on that Board’s capital requirements
    • The liability of each Board is only for amounts owing under its own debenture. There is no joint and several liability
    • The underlying debenture for each participating Board ranks pari passu with all other debentures and financial instruments issued by that Board
    • OSBFC sells Ownership Interests that represent undivided co-ownership interests in the debentures issued by the participating boards
our story our team1
Our Story - Our Team
  • Financing Structure Diagram

Participating School Boards

Semi-Annual

Payments on Debentures

Net Proceeds of Offering

Debentures

Deposited

Debentures

OSBFC

Custodian

Ownership Interests

Net Proceeds of Offering

Semi-Annual Payments

Investors

series 2003 offering
Series 2003 Offering
  • Credit Ratings
      • Prior to the 2003 offering, OSBFC obtained a third rating from Moody’s
        • Three ratings are preferred by investors for frequent and large issuers
      • OSBFC offerings enjoy the following strong credit ratings:
      • CIBC World Markets works with OSBFC and participating school boards to obtain and maintain the highest possible ratings
our story our team2
Our Story - Our Team

OFA

MILLER THOMSON

PETER HOWARTH

CSBSA

Peter Derochie - President (Simcoe Muskoka Catholic District School Board)

John Sabo - Vice President (York Catholic District School Board)

Cathy Dempsey - Secretary-Treasurer (Halton Catholic District School Board)

David Visser - Director (Durham Catholic District School Board)

Terry Miller - Director (Dufferin-Peel Catholic District School Board)

Paul McMahon - Director (Toronto Catholic District School Board)

MINISTRY

OF

FINANCE

MINISTRY

OF

EDUCATION

CIBC

WORLD

MARKETS

DAVIES WARD PHILLIPS & VINEBERG

UNDERWRITING SYNDICATE:

CIBC World Markets - Lead

RBC-Dominion Securities

National Bank

Scotia Capital Markets

BMO Nesbitt Burns

Laurentian Bank

TD Securities

McMILLAN BINCH

osbfc board of directors
OSBFC Board of Directors
  • GOVERNING BODY
  • CONTRACTING ORGANIZATION – Dealers, Lawyers, Trustee, Fund Manager, Executive Director
  • APPROVES FINANCING TERMS, STRUCTURE, PROJECTS
  • AUTHOURIZES THE EXECUTIVE (any 2) TO “PULL THE PIN”
  • REPRESENTS INTERESTS OF ALL PARTICIPANTS
osbfc executive
OSBFC Executive

DO THE DEAL AS APPROVED BY EACH TEAM

  • FACILITATE/APPROVE THE PARTICIPANTS ACCESS
  • DRIVE TO CONSENSUS TO MEET ALL NEEDS
  • MARKET OSBFC
  • LIASE WITH BOARDS, MINISTRY OF EDUCATION, OFA, SYNDICATE, LAWYERS
  • NEGOTIATE CONTRACTS
  • ASSESS PERFORMANCE OF DEALS, PARTICIPANTS & PARTNERS
  • RESPOND TO INVESTOR QUERIES
  • STRATEGIZE & RUN THE DAY TO DAY!
osbfc participants team
OSBFC Participants Team
  • HAVE MET CREDIT QUALITY
  • ESTABLISH VOLUME
  • SET TERM(S), STRUCTURE,TIMING
  • AUTHOURIZE OSBFC EXECUTIVE TO COMPLETE TRANSACTION WITHIN PARAMETERS
  • TELL OUR STORY!!
  • REALIZE SIGNIFICANT BENEFITS AND RISK SHARING
other osbfc programs
OTHER OSBFC PROGRAMS
  • POOLED MONEY MARKET INVESTMENTS
  • POOLED SINKING FUND & INVESTMENT FUND MANAGEMENT
  • INTER-BOARD BORROWING & INVESTING
  • EXPLORING A LEASING PROGRAM
our story our team3
Our Story - Our Team
  • The originating school boards had a number of key objectives to meet when assessing financing alternatives:
    • Cost
      • To minimize all-in funding costs for participating boards
      • To minimize cross subsidies between participating boards
    • Minimization of Risk
      • To ensure that participating boards are responsible only for their own debt
      • To ensure that debt servicing requirements are consistent with grant payments from the Province
      • To minimize refinancing risk
our story our team4
Our Story - Our Team
  • Flexibility
    • To avoid restrictive covenants
    • To minimize constraints on raising additional debt to meet future capital requirements
    • To maintain flexibility to add new boards
    • To enable participating boards to access the market as quickly as possible and with relative ease of execution
  • Legal and Regulatory
    • To ensure consistency with the current legal and regulatory framework
    • To ensure a default by one participant has no effect on the other participants
iii the osbfc story
III. The OSBFC Story
  • Summary of OSBFC Issue Participation by School Board
    • 25 school boards (17 Catholic, 8 Public) have participated in OSBFC pools
alternate financing approaches
Alternate Financing Approaches
  • Comparison of various long-term financing approaches
alternate financing approaches1
Alternate Financing Approaches
  • Comparison of financing approaches
alternate financing approaches2
Alternate Financing Approaches
  • One consideration for school boards is whether to develop a “pooled approach” or a “go it alone” approach
  • Over the past year, school boards in Ontario have demonstrated the viability of both approaches:
    • 25 school boards have raised debt through a pooled approach
    • 3 school boards have raised debt through individual debt issues
    • Many have “gone alone” to banks etc.
  • The choice of a pooled financing approach vs. individual financings will be influenced by:
    • Financing objectives
    • Size of financings
    • Relative cost
    • Risk minimization
    • Financing flexibility
    • Work effort required
benefits of osbfc
Benefits of OSBFC
  • Multiple Member Benefits of Pooled Financing
    • Most competitive terms and conditions
    • Costs distributed over many participating members
  • Process Benefits of Pooled Financing
    • Efficient Process
      • Centralized negotiations
      • Centralized documentation
      • Limited time and resources committed by individual participating members
    • Individual participating member credit ratings not necessary
      • Only OSBFC, the special purpose funding corporation, is rated
    • Established framework for subsequent issues
      • Orderly, well understood risk profile
      • Ease of subsequent debt issues
      • Reduced costs of subsequent issues
benefits of osbfc1
Benefits of OSBFC
  • Size Benefits of Pooled Financing
    • Ability to negotiate attractive issuance costs
      • Legal fees
      • Marketing costs
      • Underwriting commissions
    • Increased liquidity
      • Wider investor base
      • Individual investors able to purchase larger amounts
      • Lower spreads
    • Regular issuance
      • Borrow only for current capital requirements
      • Borrow in small or large amounts on attractive terms
      • Participate only in subsequent issues if new capital is required
  • Intermediary Cost Benefits of Pooled Financing
    • No fees payable to municipalities for issuing debt on behalf of participating member
benefits of osbfc2
Benefits of OSBFC
  • A pooled financing results in a number of important benefits, including:
    • Provides participants with modest financing requirements an opportunity to efficiently access the capital markets
    • Provides participants with economies of scale by spreading issue costs among multiple parties
    • Creates a special purpose vehicle that can be used by different groups of participants at different times to access the capital markets
    • Pooled issues are generally more attractive to investors as the larger issue size results in better market liquidity and therefore tighter spreads
    • Enables investors to diversify their exposure to a particular market segment amongst multiple issuers, while only investing in a single instrument
  • In general, the pooled financing concept works best for groups of participants that have the following characteristics
    • Each participant’s borrowing requirements cannot be optimally achieved independently
    • Each participant has similar strong credit quality
    • Consensus among participants on financing structure
benefits of osbfc3
Benefits of OSBFC
  • Benefits for Investors
    • The OSBFC debt issues have many attractive features for investors:
      • Strong credit ratings
      • Strong provincial support of educational funding and OSBFC financing structure
      • Large issue size provides good liquidity
      • Pooled structure enables investors to diversify risk among participating school boards
      • Amortizing structure or sinking fund reduces refinancing risk
      • OSBFC debt issues are the benchmarks for school board financings
syndicate
Syndicate
  • In order to create a liquid market for the OSBFC bonds, a syndicate of investment dealers is required
  • On a go forward basis, it’s expected that the syndicate will be adjusted based on those dealers that can add the most value
costs
Costs
  • Objective of pooled financing is achieve the lowest rate of interest for school board debenture and to minimize all-in funding costs for participating school boards
  • The most significant expenses are:
    • Commission fees
    • Legal fees
    • Rating agency costs
    • Printing costs
  • Commission fees are calculated as a percentage of the total debenture issue
  • Legal fees are shared equally and were 50% lower in the second issue (savings will depend on the number of boards participating)
  • Rating agency fees are shared equally and totaled approximately $90,000 on the first issue and zero for the second issue
  • Printing costs were 50% lower in the second issue and were shared equally
  • All-in funding costs for OSBFC Issue #1 amounted to approximately 1.04%
  • Time commitments for each board to structure and bring an issue to market have not been included; however, pooling structure should reduce aggregate time commitment