15450 So. Outer Forty Rd.
Suite 230
Chesterfield, MO 63017
(636) 519-0700
(636) 519-0792 Fax
info@mohefa.org
MHEFA
Association
Memberships
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PHASE I: PRELIMINARY ORGANIZATION
A. Application Process
Once the institution and its counsel have determined its financing needs, the Authority should be contacted. The institution will send a letter to the Authority (generally in the form attached as Exhibit A to the Policies and Practices) outlining the project and its approximate size and acknowledging the Authority’s Policies and Practices. If the project meets the eligibility requirements, the Authority's counsel will draft an inducement resolution for the approval of the Board. |
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• Preliminary Approval
Certificate of Need (CON): A health care institution that is contemplating a financing to expand its current level of service will typically require a Certificate of Need to proceed with the project. The CON is the process by which health care projects are reviewed on the basis of need, financial feasibility, and impact on quality of care. Information regarding this process is available from the Missouri Department of Health.
• Selection of Parties to the Transaction
Senior Managing Underwriter: The senior managing underwriter or investment banker is the firm responsible for structuring and marketing the bond issue. The individuals assigned to the financing are typically specialists in tax-exempt and health care or educational finance.
The senior manager's chief responsibility is to ensure his client (the borrower) the lowest possible cost of borrowing. The senior manager will perform the following services to achieve this goal: (1) secure necessary approvals for financing, (2) oversee the preparation of the Preliminary and Final Official Statements, (3) analyze financing options (term, variable vs. fixed rate, credit, etc.), (4) structure the financing, and (5) assist in the rating process and/or selection of credit enhancer.
Due to the key role of the senior manager, the Authority believes the institution should make its own choice of senior manager. The selection may be made prior to first contacting the Authority. However, the Authority's staff is available to assist the institution with the selection process at no additional cost.
The senior manager will be required to execute and deliver to the Authority a letter acknowledging that it has received and reviewed a copy of the Authority’s Policies and Practices. A form of the letter is attached to the Policies and Practices as Exhibit A.
Bond Counsel: Bond Counsel is retained to determine the validity of the proceedings that authorize the issuance of bonds and the existence of the features that render them tax-exempt.
In an Authority financing, bond counsel is selected by the Authority with input from the borrowing institution. The firm will be a qualified law firm that is located in Missouri. Its role is to render a legal opinion that states the following: (1) the Authority is authorized to issue the proposed bonds and has met all the legal requirements necessary for issuance, and (2) the interest on the proposed bonds will be exempt from state and federal income taxation.
In addition to rendering opinions as to the legality and tax-exempt nature of the transaction, bond counsel also assumes responsibility for drafting the financing documents including the trust indenture and the loan agreement.
Underwriter's Counsel: The underwriter's counsel is hired by the senior manager to assist in ensuring that adequate disclosure has been made so that potential investors can make an informed decision about purchasing the bonds. The underwriter's counsel will perform a review of the institution and the financing ("due diligence") and will be responsible for the drafting of the Preliminary and Final Official Statements. The Authority requires that the senior manager select a qualified law firm that is located in Missouri to serve as underwriter's counsel.
Co-Manager/Co-Managing Underwriter: Additional investment banking firms, which are often local or regional firms, are appointed by the Authority in larger fixed-rate financings to enhance the marketing capabilities of the financing team and to ensure the broadest distribution of bonds. The appointment of co-managers allows MoHEFA to fill perceived marketing needs and to satisfy certain constituent interests. The number of co-managers is determined by the size of the financing.
Bond Trustee (Trustee Bank): The bond trustee is a financial institution with a Missouri charter and a Missouri office, and is usually a large commercial or savings bank meeting certain capitalization requirements. The Bond Trustee acts as a fiduciary for the bondholders and is responsible for creating, maintaining and administering the various accounts/funds established by the bond documents. Toward the end of the financing process and before bonds are sold, the trustee bank is selected through a competitive bid process facilitated by the Authority. The bids are then reviewed with the institution and a selection is made.
The selected bank will then serve as trustee throughout the term of the bond issue. As a fiduciary, the trustee is involved in the administration of the business terms of the financing documents and in the exercise of remedies in the event of a default. In addition, the trustee is responsible for ensuring the proper use and flow of funds and for the institution compliance with bond document covenants.
• Organizational Meeting
After the parties to the transaction have been selected, all parties to the financing meet to discuss the structure of the financing and to plan the timing of the events for the remainder of the financing process. The Authority requires either (a) an in-person organizational meeting at the outset of the financing involving all available relevant parties before bond documents are drafted or (b) an organizational conference call among all available relevant parties at the outset of the financing before bond documents are drafted followed by an in-person document review session. (top)
- Missouri Health and Educational Facilities Authority
15450 South Outer Forty Rd., Suite 230, Chesterfield, MO 63017
(636) 519-0700 (636) 519-0792 Fax
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