The following information is more fully described throughout this Basics Handbook and is set forth here to provide an overview of a public finance transaction, the parties thereto and specific tasks that Novices may undertake. Readers should note that terms used throughout the Basics Handbook are defined in our Bond Basics Hub.

A Basic Process of Issuing Bonds

Typically, Bonds are issued because a determination is made by an Issuer or a Borrower that: (1) current revenue cash flow is not sufficient to fully finance a project on a pay-as-you-go basis; (2) current and future users of a project with a long life should contribute to the cost of the project (intergenerational equity); or (3) other reasons deemed prudent by the Issuer or Borrower requiring the issuance of Bonds. Once the determination is made to issue the Bonds, the Issuer or Borrower will assemble a financing team that often involves the following: Bond Counsel, Issuer’s Counsel and/or Borrower’s Counsel, Disclosure Counsel, a Municipal Advisor, an Underwriter (or Lender) and Underwriter’s Counsel or Lender’s Counsel (if required by the financing plan).

There are a significant number of preliminary tasks to complete prior to Closing the Bond Issue. The following table is an example of certain important preliminary tasks and determinations that the financing team must undertake:

• The purpose and authority to undertake the project and the financing;
• State and tax law considerations regarding the use of the proceeds of the Bonds;
• The source of revenues to be pledged to the repayment of the Bonds;
• The Conduit Issuer for the Bonds, if applicable;
• Any remaining and unselected members of the financing team;
• The timetable for the financing, including dates for Pre-Closing and Closing;
• The Useful Life of the project to be financed with the proceeds of the Bonds and the Maturity schedule for the Bonds (this may be limited by the Useful Life of and the type of the project, as well as the revenues pledged to repayment of the Bonds);
• Development of the structure of the financing (e.g., Variable or Fixed Interest Rate);
• How the Bonds will be sold (e.g., Private Placement or Public Offering) and market conditions (e.g., Interest Rates and Redemption provisions); and
• Required covenants for the Bonds (e.g., terms for issuing Additional Bonds secured by the same source of revenues, required coverage of Debt Service of such revenues, etcetera).

After the financing team completes the preliminary tasks, it will complete drafting the documents for the transaction, complete a Due Diligence process (analyzing and mitigating legal issues, credit risk, and factual disclosures set forth in the Offering Document), implement the financing plan (which includes the sale or placement of the Bonds with one or more investors), and execute the documentation. Finally, the Bonds are delivered to the investors, and the Issuer receives the sale proceeds in exchange for the Bonds (and, if Conduit Bonds are issued, loans the proceeds to the Borrower).

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Projects for Novices

The specific tasks that may be assigned to Novices depend on their firm’s role in a transaction (e.g., whether the firm is serving as Bond Counsel, Underwriter’s Counsel, Disclosure Counsel, Issuer’s Counsel, Borrower’s Counsel, Lender’s Counsel, or other special counsel). These tasks may be completed in their entirety by the Novice or for final review by a supervising attorney or more experienced and responsible professionals. Regardless of their level of experience or responsibility, Novices should keep the supervising professional informed as to the progress of these assignments. In addition, Novices should consult with the supervising professional about the various projects in which they are involved, particularly when fielding questions from parties outside the firm. Novices should always consult the supervising professional in the case of substantive questions on public finance transactions or firm policies.

The following section contains brief descriptions of tasks which may often be performed by Novices at firms serving as Bond Counsel or at firms serving as Underwriter’s Counsel or Disclosure Counsel.