Financial- COPS (Due Diligence Authorizing Resolutions)

Home Browse Search

From: "Edward Einowski" <eeinowski@stcel.com> To: GroupWise 4_1.SMTP("kiltz@prestongates.com","RCurt... Date: 9/1 /98 12:31 pm Subject: Re: First Draft Term Sheet and updated Distribution List I've received the term sheet prepared by Scott, Mark and Nancy and will proceed to prepare the initial drafts of the financing documents. In terms of the document structure, here's what i contemplate: 1) A Financing and Trust Agreement between the County and a oorporate trustee/paying agent. This will be structured very much along the lines of a revenue bond trust indenture for govemmental purpose bonds, subject to appropriate modifications in light of the CoP financing structure. 2) A Mortgage from the County to the corporate trustee 3) M authorizing resolution to be adopted by the County Commission I assume that undervvriter's counsel will prepare the Official Statement and Certficate Purchase Agreement for our review and comment. In reviewing the term sheet, I noted the following comments and questions: 1) In order to fully scope out the "private use" portion of the County's facilities, we'll need to get a handle on the number of parking spaces (if any) that will be reserved for use by the private tenant. In a related vein, we'll need toflesh out the sources and uses in order to confirm that the County equity is sufficient to cover the costs of the private use space. 2) The term sheet refers to the funding from CoP proceeds of interest on the CoPs for an unspecified number of months after completion. Please be advised that the funding of interest after completion is viewed as the funding of working capital. As such, it is subject to severe restrictions unless, in the particular circumstances of the case, it falls within a very limited number of exceptions. We will need to explore this matter further to determine the extent to which post-completion interest can be funded in the present case. 3) I'm a bit puuled by the proposal to limit completion certificates to $2.25 million. Given that this is a"subject to appropriation" financing, I would think the Certificateholders would want to make sure that the County completes and moves into the facility since the risk of non-appropriation would seem to increase if the facility is not completed. If we couple this with the comfort the Certificateholders should take from having a fixed price contract before we sell the Cert~cate (I assume this is still the plan, based on our last meeting), I wpuld think it makes more sense to have the unlimited right to issue completion cert~ciates as needed to complete the project in acxordance with the original plans and specs (i.e., the County could not issue completion certficates to finance the incremental costs of a revised project). Please consider this approach. 4) I think I understand the reasoning behind the limitation on refunding certificates. But if so, I'm not sure this limitation should apply across the board. Rather, it seems to me that the original certificate holders only have a right to limit the issuance of refunding certificates if it is a partial refunding. If the County desires to refund the entire issue (even at higher debt service), I don't see why it should be prevented from doing so. In short, 1 would propose to restrict the refunding limitations to partial refundings. Please consider. 5) The parity certificate provisions require some thought. In this case, "parity" (I assume) dces not mean other general fund obligations. Rather, it refers only to future cert~cates that are secured by the Mortgage and any reserve fund on a pari passu basis. Is this what the parties intend? Please advise. Obviously, "parity" could mean any obligation payable out of the General Fund on a parity with the Certficates, but this would enoounter various problems (e.g., what do you do with a"true lease", which has just as much impact on the Cert~cateholders security as any other obligation). If my interpretation is what is intended by "parity" here, then parity certificate provisions would apply ony to certificates issued under the Financing and Trust Agreement for the purpose of financing improvements to and expansions of Courthouse Square. Furthermore, the County should be aware that if the Certificates are not insured and consent of the Certificateholders is required to issue additional parity Cert~cates, then as a practical matter the Counry will probably never be able to issued additional parity Certificates since Certificateholders are notorious for not responding to requests for consent. There are at least two ways around this: First, subject the ability to issue parity debt to some kind of coverage test. Such a coverage test would, in itself, require careful though since we are not dealing with a net revenue pledge (or any other pledge of a revenue stream), but are dealing with a General Fund obligation. Second, we could structure the consent provisions so that