Fulfill Authority’s Mission. The Mission of the Health and Educational Facilities Authority of the State of Missouri is to provide access to the capital markets in an effort to lower the cost of health and educational services in Missouri by providing high quality, readily available, low cost financing alternatives for Missouri public and private, non-profit health and educational institutions.

Professional Decorum. The Authority’s staff and advisors are to assist borrowing institutions prior to, during and after financings in a professional and courteous manner.  The staff and advisors operate under the assumption that the Authority is in existence to serve its constituents.

Authority’s Role in Financings. The Authority is to advise and assist borrowing institutions in qualifying for, structuring and completing quality transactions.  The Authority has determined not to dominate financings and dictate financial terms.  The Authority relies on the judgment of the rating agencies, credit enhancers and the underwriters to negotiate most terms with the borrowing institutions and to assure that proper protection and disclosure is provided bondholders.  The Authority reviews the terms of the financing, advises and assists the borrowing institution with the financing process and insists on certain terms for the protection of its reputation and to assure that it is free from monetary liability.

Preliminary Intent Resolution. The Authority process starts with the adoption by the Authority of a preliminary intent (or inducement) resolution.  Authority’s counsel drafts the resolution upon receipt by the Authority of letters from the borrowing institution and its underwriter or bond purchaser requesting inducement and generally describing the proposed financing, including a description of the project and the estimated principal amount, and an acknowledgment of these Authority’s Policies and Practices.  Attached hereto as Exhibit A is a general form of such a letter.

Organizational Meeting. The Authority requires either: (a) an "in-person" organizational meeting at the outset of the financing involving all available relevant parties before Bond Counsel drafts any bond documents; or (b) an organizational conference call involving all available relevant parties before Bond Counsel drafts any bond documents and an "in-person" document session involving all available relevant parties to discuss the first draft of bond documents. The only exception to this requirement is for annual program financings as to which "in person" meetings may be waived by the Authority but the organizational conference call is required.

Official Statement. The Authority requires the following in connection with the bond offering document (Official Statement):

1. Document must follow legal requirements and general industry practices as to disclosure relative to bonds and borrowing institution; the borrowing institution and underwriter, rather than the Authority, are responsible for the preparation of and the disclosure in the Official Statement.
2. Document provides that Authority is not responsible for payments on the bonds other than out of loan repayments from the borrowing institution.
3. The Authority does not sign the Official Statement.
4. Underwriter’s Counsel provides a legal opinion addressed to and satisfactory to the Authority as to the adequacy of the disclosure.
5. The borrowing institution is required to comply with applicable SEC requirements concerning on-going disclosure after the bonds are issued.
6. The Official Statement must be in “substantially final” form at the time of the adoption by the Authority of the final bond issuance resolution.
7. The Official Statement can be printed and the bonds marketed in advance of the adoption of the final bond issuance resolution by the Authority with the prior consent of Authority staff; the risk that the resolution may not be adopted will rest with the borrowing institution.
8. On the cover of the Official Statement, there will be no type size that is larger than the type size used in the name of the Authority.

Trustee’s Role. Once the bonds are issued, the bond documents provide to the extent possible, that the Trustee rather than the Authority is responsible for monitoring the borrowing institution’s compliance with the documents for the protection of the bondholders.  This includes declaring defaults and covenant compliance.  Trustees on Authority bond issues are subject to performance audits commissioned by the Authority  and must correct any performance problems or irregularities disclosed in such audits.  Trustees also must provide information regarding the bonds and the borrowing institution reasonably requested by the Authority including any year-end audit materials.

Bond Documents. The Authority requires, among other matters, in connection with bond documents:

1. Standard representations, warranties, covenants and default provisions.
2. All attorneys’ opinions and accountants’ letters addressed to the Authority.
3. Bond Counsel to draft basic bond documentation and to provide legal opinion as to the validity and tax exemption of the bonds.
4. Bond Counsel to draft bond issuance resolution to be adopted by Authority, to be provided to Authority and Authority’s counsel for review no later than the Wednesday before the meeting at which the resolution is to be adopted.
5. Bond documents in “substantially final” form at the time of adoption by the Authority of the final bond issuance resolution.
6. Bond Counsel to prepare and cause the publication of any TEFRA notice of public hearing, after review by the Authority and its counsel, and obtain the Governor’s or such other approval as is required by the tax or other laws.
7. Bond Counsel to provide material referencing tax compliance.

Purchase Contract. The Purchase Contract among the underwriter, the Authority and the borrowing institution providing for the sale of the bonds is drafted by the Authority’s counsel.  The Purchase Contract will contain provisions regarding indemnification of the Authority by the underwriter and the borrowing institution.

Pricing. The Authority requires that it and its financial advisor be involved in the “pricing” of the bonds.  At a minimum this should include participation in the pre-pricing and the pricing calls. (top)

Bond Counsel: The Authority selects Bond Counsel from an approved list of Missouri firms.  The Authority typically considers the request of the borrowing institution if there is a strong preference for a particular firm on the Authority’s approved list.

Senior Managing Underwriter: The borrowing institution selects its Senior Manager.  The Authority staff and financial advisor will assist in making this selection if requested by the borrowing institution.  The Senior Manager must execute and deliver to the Authority a copy of the letter included with Exhibit A hereto in connection with the submission by the borrower of the letter requesting an inducement resolution.

Co-Managers: The Authority appoints Co-Managers based on the size of fixed rate transactions:

0 - $10 million	–	None
$10 - $20 million	–	1 Co-Manager
$20 - $30 million	–	2 Co-Managers
Greater than $30 million	–	at least 3 Co-Managers

The Senior Manager will allocate at least 25% of the fixed rate bonds to the Co-Managers. The Co-Managers will not receive management fee.

The Senior Manager will allocate at least 25% of the fixed rate bonds to the Co-Managers.  The Co-Managers will not receive management fee.

The Authority does not require Co-Managers on variable rate transactions.

Allocation Procedures and Priority of Orders:  The Co-Managers shall receive offering documents from the Senior Manager a reasonable amount of time prior to the pricing of the bonds and shall be included on all “pricing” calls.  It is the Authority’s intent to assure the “equitable” treatment of Co-Managers with respect to bond allocation.  To that end, the Senior Manager will distribute the Agreement Among Underwriters to the Authority and Co-Managers at least one week in advance of pricing for comment and approval.  Further, the Senior Manager will discuss order flow and proposed allocation with the Authority prior to final allocation of bonds.

Criteria for Selecting Co-Managers: Selection of Co-Managers is based on the firm’s ability to enhance the marketing capabilities of the financing team in the particular transaction and to ensure the lowest interest rates and broadest distribution of bonds.  The appointments allow the Authority to fulfill perceived marketing needs.  All selections are made with these guiding criteria in mind.  Some specific factors taken into consideration  include the following:

1. The Authority will typically consider the preferences of the borrowing institution.
2. Past favorable experience in selling bonds issued by the Authority and achieving good results for borrowing institutions.
3. Balancing the strengths of the Senior Manager to insure that appropriate transactions have both retail-oriented managers and institution-oriented managers.
4. In appropriate transactions making sure that national distribution is available by national firms as well as regional distribution.
5. Insuring that at least some bonds are available for sale to Missouri residents and for residents throughout the State.
6. Involving firms as Co-Managers when they have supported Authority financings as a Senior Manager and otherwise promoted the goals of the Authority.

Underwriter’s Counsel: The Senior Managing Underwriter selects the Underwriter’s Counsel; this must be a Missouri firm.  The Authority retains the right to refuse any firm.

Trustee: Must be a banking institution qualified to do business in Missouri and with a Missouri office and which is large enough to handle the financing in question based on assets and experience.  The trustee, or its guarantor, must have a minimum reported capital and surplus of the lesser of the principal amount of the bonds or $50 million (or comparable financial test satisfactory to the Authority).  Requests for Proposal will be sent by the Authority, if requested by the borrowing institution, to the banks on the Authority’s approved list and when the proposals are received a copy is sent to the borrowing institution for selection.   The Authority does not dictate the choice of trustee nor is the borrowing institution required to accept the lowest bid. Firms can serve as a Senior or Co-Manager and/or as Bond Trustee or Master Trustee and/or as credit enhancer on transactions rated in any ‘A’ category or better by Standard & Poor’s or Moody’s.

Printer: Prefer Missouri firm to print Official Statement. If a Missouri firm is not available to print the Official Statement or if there are special circumstances, bids may be solicited from out-of-state firms.  The Authority will, at the borrowing institution’s request, solicit bids from qualified printers. The Authority does not dictate the choice of printer nor is the borrowing institution required to accept the lowest bid. (top)

Minimum Credit Rating: The Authority will consider each financing based on the higher of the underlying or enhanced credit ratings from Standard & Poor’s and/or Moody’s, information provided by the borrower, analysis of the staff and advisors and any other applicable information.  Financings with a rating of BBB+/Baa1 or lower will require further analysis and discussion during the approval process and will be considered on a case by case basis.  The nature of the credit, the collateral, the project, the covenants and borrowing alternatives will all be part of the analysis.  A presentation to the Authority by the borrower or its representatives may be required.  Unrated financings will be considered for private placements with sale restricted to financial institutions, corporations and other sophisticated investors and on such other terms as approved by the Authority at time of issuance.

Certificate of Need: A health care institution that is contemplating a financing to cover certain specified levels of cost will be required by Missouri statute to obtain a Certificate of Need (“CON”) from the Missouri Health Facilities Review Committee before proceeding with the project.  The CON process involves the review of health care projects on the basis of need, financial feasibility and impact on quality of care.  The Authority fully supports compliance with CON requirements and will take no action to cause the avoidance of compliance with such requirements.

Advertisement of Pre or Post Sale: Any advertisement (i.e., tombstone) either before or after the sale of Authority bonds has to be reviewed and approved by the Authority.

Financial Advisor: It is the practice of the Authority to utilize the services of a financial advisor. Certain services of the financial advisor are extended to Authority borrowers in the course of a financing. The Authority’s financial advisor does not serve as financial advisor for individual borrowings under the Direct Deposit Program.

Authority Fees and Costs: The borrowing institution will be responsible for the payment of the Authority’s annual on-going fees and the cost of its general counsel and financial advisor pursuant to the then current schedule of the Authority.  The current schedule is as set forth in Exhibit B hereto. (top)

For a discussion of the issuance of bonds by the Authority for projects outside Missouri, please see the discussion in the accompanying document “Issuance of Bonds for Projects Located Outside the State of Missouri – Policy Matters and Procedures” attached hereto as Exhibit C. (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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