bond-basics

Underwriter

A Securities broker or dealer that purchases Bonds from an Issuer and resells them to investors. Underwriters may purchase the Bonds from the Issuer in a Negotiated Sale or a Competitive Sale.

The Underwriter’s primary role is to purchase the Bonds from the Issuer and to sell them to the investors.  The Underwriter’s involvement in the financing may depend upon whether the Issue is a Negotiated Sale or Competitive Sale.  If there are several Underwriters, a Managing Underwriter will be selected to serve as the Underwriting Syndicate’s primary contact with the financing team and may make recommendations as to the overall structure of the Bonds, the transaction, the cash flow and the date of sale.  The Underwriter usually assists the Issuer with obtaining Ratings from the Rating Agencies and recommending when Credit Enhancement should be obtained.

Life’s a Party

Learn more about the various parties involved in a municipal securities transaction and their roles.


See Also

Underwriter’s Counsel

An attorney or firm of attorneys engaged to represent the underwriter(s) in connection with the issuance of bonds.

Underwriter’s Discount

The difference between the amount an underwriter pays the issuer for the bonds at the closing (i.e., the purchase price) and the price at which the underwriter sells the bonds to the public (i.e., the issue price).

Negotiated Sale

The sale of a new issue of bonds by an issuer through an exclusive agreement with an underwriter or underwriting syndicate selected by the issuer.

Competitive Bid / Sale

A method of selling bonds in which one or more underwriters submit proposals for the purchase of the bonds.

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Cost of Issuance

Expenses paid by or on behalf of the Issuer or a conduit borrower which are directly related to the issuance and sale of the bonds.