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HomeMy WebLinkAbout95-95 RESOLUTIONRESOLUTION NO. 95-95 A RESOLUTION APPROVING AN UNDERWRITING SERVICES AGREEMENT IN THE AMOUNT OF $9.94 PER $1,000 OF BONDS ISSUED FOR THE REFINANCING OF THE 1979 CONTINU ING EDUCATION CENTER REVENUE BONDS WITH LLAMA COMPANY. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. The Council hereby approves an underwriting services agreement in the amount of $9.94 per $1,000 of bonds issued for the refinancing of the 1979 Continuing education Center Revenue bonds with Llama Company and authorizes the Mayor and City Clerk to execute same. A copy of the agreement is attached hereto marked Exhibit "A" and made a par( hereof. PASSED AND APPROVED this 5th day of July , 1995. APPROVED: i By: �. • <G .71. r,_ Fred Hanna. Mayor ATTEST') By: (I/2% c /CL LJ J Traci Paul, City Clerk Llama Companys June 19, 1995 The Honorable Fred I lanna Mayor of Fayetteville 113 W. Mountain Street Fayetteville, Arkansas 72701 Dear Mayor Hanna: Llama Company is pleased to present this Letter of Engagement to act as the senior manager to the City of Fayetteville for its upcoming IIMR tax bond issue. The firm is fully committed to the City of Fayetteville and to the successful and timely completion of this highly important financing. The scope of services will be as submitted in our response to the City's Request for Proposal *95-7, dated May 19, 1995. As compensation for the investment Nanking services related to the financing, Llama Company will be paid an underwriter's d.scount of $9.94 per bond contingent upon closing of this bond issue. This discount includes all of the management fee, sales takedown, underwriting risk and underwriters expenses for Llama Company. The City will be responsible for the other issuance costs of the financing which may be paid from bond proceeds. Thank you for giving us this opportunity to contin::e our relationship with the City of Fayetteville and we look forward to a successful financing. If our proposal and fee for services meet with your approval, please indicate with your signature, below. Sincerely, / A-Mez� David C. Hausam Vice President cc: Loren Carlson, Senior Managing Director Collin Chow, Vice President City of FayettpGille // / By: ( Date: 7-S 9tl One Mcllroy Plaza • Suite 302 • Fayetteville. Arkansas 72701 • (50:.) 444-4000 • FAX4 444-4042 Llama Company Proposal to provide: Underwriting Services for: The City of assaaaak Fayetteville May 19. 1995 Llama Company May 19, 1995 The Honorable Fred Hanna Mayor of Fayetteville 113 W. Mountain Street Fayetteville, Arkansas 72701 Dear Mayor Hanna: On behalf of Llama Company, we are pleased to present our credentials to provide underwriting services to the City of Fayetteville. As we have shown from our previous financings for the City, Llama Company is well qualified to serve as the City's senior manager. We are confident that a review of our response to the City's request -for -proposal, excerpts of which are highlighted below, will lead the City to conclude that Llama Company's appointment as underwriter is clearly merited and is in the City's best interest. Commitment to Fayetteville. Llama Company has demonstrated its commitment to the City since the openmg of our corporate headquarters in September, 1988. Llama Company was initially staffed with eight employees and has since grown to over 75 highly qualified and experienced professionals The firm and its employees' annual economic impact for the City and NWA is in excess of $10 million. In addition to these commitments, the professionals at Llama Company are heavily involved with the chambers, schools, local governments, and other charitable and non-profit organizations throughout Northwest Arkansas. Commitment to Public Finance. While major New York Wall Street firms such as CS First Boston: Donaldson, Lufkin & Jenrette Securities Corp; and Kidder, Peabody & Co. have recent:y exited from the municipal market, Llama Company remains firmly coraniittcd to the growth of the municipal business and the service of our municipal clients. As an example, Llama Company has nearly doubled its staff by hiring over 35 seasoned professionals from national and regional investment banking, legal, and accounting firms, as well as from municipal issuers. Llama Company is firmly committed to serving the City of Fayetteville and other tax-exempt issuers well into the 21st Century. City of Fayetteville Experience. Over the past five years, Llama Company has sole managed three financings totalling more than $48 million for the City. Each of these issues were marketed at lower interest rates than the then -prevailing market. Please refer to Appendix a. In addition, since 1990 Llama Company has worked with the City's staff to continually monitor the market and analyze the economic benefit of refunding the City's CEC and other outstanding bond debt. As the only full-service investment bank based in Fayetteville, no other firm knows more about the City or its financings than Llama Company. One P.L 1-oy Plata • Su.le 3C2 • Fayetteville. Arkansas 72701 • 1501) 4444000 • FAX #444-4042 Institutional Sales Capabilities. .Llama Company is one of the most successful regional institutional marketing firms in the securities industry. We employ 25 dedicated municipal institutional sales professionals and traders who provide a variety of investment products and services to over 1,100 of the largest and most frequent purchasers of municipal bonds in the industry. In the past five years, the firm has sold over $10 billion to these large sophisticated bond purchasers Retail Sales Capabilities. Llama Company, while being pnmarily a institutional sales firm, is uniquely positioned to serve a large number of high -net -worth individuals, who are some of the most active individual investors of tax-exempt bonds in the United States. Within the past five years, Llama Company has sold over $100 million of tax-exempt bonds to these individuals. In addition, Llama Company has strong relationships with all other Arkansas retail firms and have created special selling groups to enhance our Arkansas retail sales coverage. Capital Commitment. Two important factors that the City should consider in selecting its underwriter are the firm's total capital and the firm's willingness to use this capital on behalf of its clients. As indicated in the body of this proposal, Llama Company has excess net capital of over $18 million and we have consistently demonstrated our willingness and capability to nsk our capital to underwrite our clients' bond issues under difficult market conditions. We hereby pledge to the City that we will, if necessary, underwrite its transactions at a fair pnce to ensure a successful sale regardless of the prevailing market. Full -Service. Llama Company brings to all of its client assignments the financing expertise and market knowledge necessary to structure a transaction at the lowest possible cost of funds. Our relationship with our clients extends to well before and beyond the pricing period. Our banking and marketing professionals are available at a moment's notice to assist the City in evaluating the optimal and most cost effective financing alternatives. In conjunction with the City staff, the firm will develop an effective capital plan, make bond insurance and rating agency presentations, and select the safest but highest yielding bond escrow and/or bond proceeds investment strategy After the sale. the firm will prepare a pricing book which will present a distribution analysis based on the buyer types and geographic region in order to position the City for future sales. Lastly, we commit to providing a secondary market in the City's bonds thereby assuring liquidity to your investors. Once again, Llama Company appreciates this opportunity to present our recommendations to the City. We view this financing as extremely important for both Llama Company and the City. The firm believes we have the necessary qualifications and experience needed to successfully complete any financing on a timely basis. We look forward to working with you, your staff and the City Council as the senior underwriter for the City. If you have any questions or desire any additional information, please do not hesitate to call us at (501) 444-4009. Sincerely, cieN/daea David C. Hausam Vice President :✓)/nom �.- o-0-4 .v-- `_ /1.oc._2 Collin P. Chow Vice President TABLE OF CONTENTS Llama Company SECTION Primary Professionals Support Services ProvidedlSchedule of Events .. :.. :.. ... .. .. 6 Marketing Plan/Sales •Capabilities ..... .. 12 Experience of Proposing Organization ........ .. .. .. .. 16 Bond Rating Process ...... .. .. .. .. 19 Proposed Fees and Expenses .. 23 PAGE APPENDIX Results of Prior Fayetteville Financings ....... .... .. a Llama Company Experience ... .. .......... ......... . . .. b Insurance Break-even Analyses . .. ..... .. .... c Refunding Scenarios Continuing Education Center Bonds ... d Walton Arts Center Bonds .. .. :......... .......... d Schedule of Events . . . . . FINANCING TEAM TEAM SlUPERVISORS Alice L Walton, CEO Loren D Carlson, SMD DAY-TO-DAY BANKERS CREDIT David E Lewis, MD 1 David C. Hausam, VP Collor P. Chow, VP 4 STRUCTURE William G. Watt, MD Steven M. Kerr, VP UNDERWRITING & TRADING Donald B Michael Clanton, SMD Dodd, MD PROFESSIONAL STAFF Llama Company Llama Company's municipal finance effort is made up of the Public Finance, Research.& Analysis, and Sales & Trading Departments From these Departments, Llama Company has assembled a team of highly qualified and experienced professionals to serve the City of Fayetteville These individuals, cumulatively, have over 120 years of experience with various types of financings. In addition , all the other professionals of the firm will be available to assist on the City of Fayetteville s financings on an as -needed basis. Resumes and: responsibilities for each team member fol lows. TEAM SUPERVISORS Ms. Alice Walton and Mr. Loren Carlson will serve as Team Supervisors for the duration of Llama Company's engagement with the City. As Engagement Supervisors, Ms. Walton and Mr. Carlson will pledge to provide ati the necessary resources of the firm to the City's financings to ensure their completion at the lowest cost and in a timely manner. Alice Walton, Chairman and President Ms. Walton founded Llama Company in 1988 and serves as Chairman and President. She is actively involved in all areas of decision making and management. Ms. Walton has been responsible for the Walton family investment portfolio since 1975 She has served as Vice Chairman and head of all investment -related activities for the Arvest Bank Group, establishing the discount brokerage business and the bank dealer operation. Ms. Walton has a Bachelor of Arts in Economics and Finance from Trinity University in San Antonio, Texas, and has also completed graduate work at Tulane University Business School in New Orleans, Louisiana In addition, she has received an Honorary Doctorate .of Business Administration from Southwest Baptist University in Bolivar, Missouri, an Honorary Doctorate from the Philippine Women's University, and an Honorary Doctorate of Human Letters from Audrey Cohen College She has been aciive on the Board of the University of 1 Llama Company Arkansas for Medical Sciences at Little Rock, and the Board of Advisors for the University of Arkansas Graduate Business School at Fayetteville. Ms Walton has also served the State of Arkansas on the Governor's Aerospace Task Force in 1992 and was an international' judge for the Students In Free Enterprise. Ms. Walton serves on the Pace Industries Board of Directors, the Advisory Board for the Arkansas Community Foundation, the Arkansas State University -Beebe Charitable Foundation Board of Trustees, the Asia Society Board of Trustees and Finance, Budget and Investment Committee, the Business Advisory Committee for The transportation Center at Northwestem University, Northwest Arkansas Big Brothers/Big Sisters Advisory Board, and the Northwest Arkansas Council as Chairman -Emeritus. Loren D. Carlson, Senior Managing Director Mr. Carlson, who has headed Llama Company's Public Finance Department since August 1994, has over 20 years experience in a wide variety of municipal revenue and general obligation bond transactions, serving as senior manger, co -manager and financial advisor. His responsibilities typically include supervision of all banking functions associated with the financing and direction of the development and implementation of the financings. Prior to joining Llama Company, Mr Carlson spent 12 years with Chemical Securities Inc and its predecessor, Manufacturers Hanover Securities. During that time he supervised the underwriting of 393 transactions totaling $15.5 billion. Prior to joining Manufacturers Hanover, he was employed in the Public Finance Department of Blyth, Eastman, PaineWebber and the Student Loan Marketing Association (Sallie Mae) Mr. Carlson is a.graduate of Drake University and holds a Masters of Business Administration Degree from Adelphi University. DAY-TO-DAY SENIOR BANKERS Mr. David Hausam and Mr. Collin Chow will serve as the senior bankers for the City's financings. They will coordinate the activities of all team members and will serves as the day-to-day contacts for the City. David Hausam, Vice President Mr Hausam joined Llama Company's Public Finance Department in August 1989 and is a senior member of the firm's infrastructure and governmental groups. Since joining Llama Company, Mr. Hausam has worked with various local and state governments in structuring their debt programs. Issuers that Mr Hausam has served as senior banker includes Llama Company the City of Fayetteville, Beaver Water District and Liberty County, Texas, Correctional Facilities Board. His responsibilities include all aspects of financial structuring, cash flow analysis, document preparation and review, feasibility analysis of projects and development of computer modeling programs. He is currently the financial advisor to the Northwest Arkansas Community College and serving as the firm's senior banker to the Northwest Arkansas Regional Airport. Prior tojoining Llama Company, Mr Hausam served as City Treasurer and Comptroller of Bentonville, Arkansas from 1984 to 1989. While with the City of Bentonville, he structured the City's long term debt and designed and implemented their data processing effort. He was also actively involved in industrial development revenue financings for various industries in Bentonville and is currently serving on the Bentonville City Council Mr Hausam also served as Assistant Finance Director for the City of Fayetteville, Arkansas from 1970 to 1984. During this period he was involved in all phases of municipal finance and assisted in the financing of the Continuing Education Center, municipal water and sewer projects and municipal parking projects. David graduated from the University of Arkansas majoring in Business Management Collin P. Chow, Vice President Mr. Chow has over nine years of municipal finance experience, having served as a senior banker orfinancial advisor to many of the largest and most sophisticated municipal issuers in the country. Mr Chow currently serves as head of Llama Company's Municipal Infrastructure Finance Group having joined the firm Bear, Stearns & Co Inc. Mr. Chow was a vice president of that firm's Public Power and West Coast Governmental Banking Groups. Prior to his three year engagement with Bear Steams, Mr. Chow served for four years with Tucker Anthony Incorporated of Boston, Massachusetts where he was manager of its Municipal Quantitative Department He began his career with Masterson & Company in Houston, Texas where he had an opportunity to work extensively with a diverse group of tax-exempt issuers in the southwestern United States. Large municipal issuers to whom Mr. Chow has served as senior banker or financial advisor include the cities of Memphis, Tennessee, San Jose, California; Boston, Massachusetts, and Houston, Texas. Additionally, he has also completed large and complicated financings for Harris County, Texas; San Joaquin County, California, the states of California, Michigan, New Hampshire, and Massachusetts Llama Company Mr. Chow holds a Bachelor of Science Degree in Economics from Suffolk UJniversityin Boston, Massachusetts. CREDIT Mr. David Lewis will use his considerable experience in municipal bond arbitrage to review the credit of the City and make recommendations of measures to be taken to increase the credit worthiness of the City's financings. David E. Lewis, Managing Director After graduating from the University of Arkansas in 1968 with a degree in finance, Mr. Lewis worked for Salomon Brothers 'in their Chicago office from 1960 until 1981. His responsibilities included being in charge ofgovemment and municipal sales for the Chicago territory. Mr Lewis transferred to Salomon's New York office in .1981 and remained with Salomon until 1987. His responsibilities included managing municipal sales for a period of time and working in the government bond department as sales manager for financial futures and options. Prior to joining Llama Company in March 1993, Mr. Lewis was a partner with Greenwich Capital of Greenwich, Connecticut. At Greenwich Capital, he was in charge of the Municipal Arbitrage Department which traded cash municipals. municipal futures, treasury bonds, utility stocks, futures and options STRUCTURE Mr. Steven Kerr, under the direction of Mr. Hausam and Mr. Chow, will develop all the computer modeling for the City of Fayetteville's financing Steven M. Kerr, Vice President Mr. Kerr has broad experience in the analysis of debt structures and their underlying assets His background also includes considerable accounting expertise with an emphasis in the analysis of financial statements and in securities valuation. Prior to Joining Llama Company, Mr. Kerr was with the Capital Markets Group of Ernst & Young LLP in Memphis, Tennessee. During the period of Mr Kerr's association with Ernst & Young LLP, he was primarily responsible for the structuring and analysis of debt securities and the concomitant analysis of the underlying assets in such areas as student loan finance, local municipal finance, FHA hospital and nursing home mortgage bond finance. single and multi -family housing finance, commercial and automobile loan finance, and various other asset-backed securities. Mr Kerr's work also included federal income tax analysis on structured debt financings, the building and operation of management Llama Company information systems and corporate valuation Before that, Mr. Kerr was associated with Morgan Keegan & Company Mr. Kerr is a graduate of Rhodes College in Memphis, Tennessee. UNDERWRLTLIG & TRADING Mr. Donald Clanton and Mr. Michael Dodd will be responsible for the commitment to underwrite the bonds. Furthermore, they will supervise Llama Company's sales and marketing professionals to ensure a through marketing of the City's bonds. Donald B. Clanton, Senior Managing Director Mr. Clanton joined Llama Company in August 1994 as Senior Managing Director, Sales and Trading. In 1964 he received his Bachelor's Degree from Mississippi State University in Marketing and Finance He brings to Llama Company twenty-two years of experience in the securities industry.. Immediately prior to joining Llama Company, Mr. Clanton was based in Memphis, Tennessee as President and Managing Director of Commerce Investment Corporation's institutional group. He joined Commerce in 1985 as First Vice President and Manger of Institutional Sales. From 1981 to 1984, Mr Clanton held the position of Senior Vice President at Union Planters Investment Bankers Group. During his tenure at Union Planters, he significantly expanded sales revenue and staffing levels Mr. Clanton is associated with various business endeavors. He is a member of the Securities Industry Association and the Public Securities Association He served as President and a Board member of the Memphis Investment Bankers Association and has held significant responsibilities with the National Association of Securities Dealers Michael C. Dodd, Managing Director Mr. Dodd joined Llama Company in February 1995 as Managing Director of Trading. He brings to Llama Company twenty-four years of experience in institutional sales, trading, and municipal finance. Mr. Dodd managed the municipal trading operation at Stephens Inc. from 1972 through 1983. From 1984 through 1986, he managed the Municipal Bond Department for UMIC in Memphis, Tennessee Most recently he was Director of Trading at Meridian Capital Markets, a division of Meridian Bank in Reading, Pennsylvania, where he was responsible for risk management in the capital markets group. Mr Dodd attended Arkansas Tech University and .Arizona State University where he majored in International Economics. He served in the U.S. Army Artillery from 1968 through 1970. SERVICES Llama Company The public finance professionals of Llama Company have the capacity and experience to provide all the services necessary to insure the successful development and implementation of the City's financing plan. The following discussion sets forth the basic approach we will take in providing these services. Ability to provide advice to the City on bond market conditions and timing of the sale of its bonds. Llama Company will advise the City as to current and anticipated market conditions and the most appropriate date and time for the sale of the City's bonds. In order to appropriately advise the City as to a desirable date of sale, we will follow the following market indicators. The general conditions of capital markets, including the imposition of any unusual restraints on monetary supply by the Federal Reserve Board; The status of recently sold negotiated and competitive bond issues including syndicate balances; and The supply of issues coming to market. Particular attention will be paid to potentially competitive issues which tend to originate from issuers within the State of Arkansas, as well as issuers in other states which offer bonds of a similar size and credit rating 6 Llama Company Ability to provide assistance to the City in determining the term and amortization schedule, call provisions, and other factors which are relevant to marketing the City's bonds. This shall include the preparation of maturity schedules and debt service projections which represent effective marketing structures for the City's bonds. Llama Company will assist the City, its Bond Counsel and staff in the formulation of a comprehensive financing plan. Llama's role in the formulation of the financing plan will be to relate the needs of the City to those of the capital markets in order to obtain the lowest cost of financing We will collect, review and develop data, prepare debt service models, identify potential purchasers of the bonds, analyze general economic indicators, and review the performance of various financing structures used in recently marketed issues. Llama Company will recommend the term and amortization schedule for any proposed bond issue, taking into consideration the City's requirements, prevailing yield curves, demands of potential buyers, and various annual debt service payment options such as level, level net, accelerated and deferred. Matunty schedules will be analyzed by computer modeling which include estimated interest rates, principal maturities and annual debt requirements. Schedules will be updated, as necessary, to reflect changes in market conditions and to meet the City's needs. Llama Company will review all potential debt structures using serial, term, super -sinker or variable rate bonds and will address the benefits and disadvantages of each structure with the City. We will recommend the optimal structure that will result in the lowest cost of financing while meeting all the needs and requirements of the City. Llama Company will review call premium alternatives and recommend the option that will minimize the overall cost of the financing and provide the most flexible structure to the City. • Llama Company will assist in the development of other financial and investment provisions to be included in the bond documents. These terms include, among others, the establishment of the debt service reserve requirement, Llama Company flow of funds from the required bond accounts, bond issue dates, procedures for investment of bond funds and the terms of the bond sale. In developing these terms, Llama Company will recommend inclusion of terms that are most favorable and flexible to the City while meeting the goals and objectives of any potential bond purchaser Ability to present and evaluate alternative and/or innovative financing mechanisms. Llama Company's bankers have had extensive experience with CAB's, variable rate debt, original issue discount bonds, premium bonds, super -sinker bonds, and derivative products such as floating/inverse floating rate bonds, indexed inverse floating rate bonds and embedded caps. Llama Company will review the City's needs and prepare cost analysis of appropriate financing mechanisms for the City's review. Ability to work with the City to obtain the best possible bond rating including attendance at any presentation to the rating agencies, if requested by the City. Llama Company will use its considerable credit experience to establish the highest possible credit rating for the City. Llama Company will develop a rating strategy and formal rating presentation which highlights the strengths of the City and its management In addition, Llama Company will attend and participate in any presentation. Ability to prepare the Preliminary Official Statement and the final Official Statement and other related documents and materials. Llama Company will prepare the preliminary and official statements to ensure full disclosure in accordance with the most recent guidelines established by the Municipal Securities Rulemaking Board (MSRB) and the Government Finance Officers Association (GFOA). In addition, Llama Company will assist the City's staff and Bond Counsel in the preparation of the Trust Indenture, Bond Ordinance, Arbitrage Certificate and other documents as may be necessary for the financing Also, Llama Company will prepare the draft and 'final Bond Purchase Agreement for the approval of the financing team. Llama Company Ability to determine the feasibility of bond insurance and to arrange for the selection of a bond insurance firm should insurance be desirable on a given issue. Llama Company will use its proprietary bond insurance break- e‘en analysis, please see Appendix c, to determine the economic benefit of insuring the bond issue with one of the major bond insurers and will make recommendations to the City concerning any potential savings from using bond insurance Llama Company will coordinate the preparation of the documents necessary for the insurance review. Ability to arrange for selection of trustee/paying agent/registrar services, if necessary. Llama Company has extensive contacts and experience with a number of banks which provide trustee/paying agent/registrar services. Llama Company will evaluate their proposals and, if the City wishes, select the trustee/paying agent/registrar Ability to attend all meeting of the City, assist in presentations at said meetings, and attend all signing/closings. conferences, etc. as deemed necessary, by the City. Llama Company's team approach to this financing and the location of its headquarters in Fayetteville offer the City an unparalleled level of service and accessibility for any meetings, conferences or presentations which may be deemed necessary by the City. Ability to coordinate printing of the bonds with bond counsel. Llama Company will assist the City's staff and Bond Counsel in determining whether actual bonds will be printed or if the bonds will be offered as book -entry -only. If bonds are to be printed, Llama Company will review and approve the proof of the bonds prior to printing. In addition, Llama will coordinate the printing and distribution of all bond documents, including the bond ordinance, trust indenture, arbitrage statement and the bond purchase agreement to all parties on the distribution list. Llama will coordinate the printing and distribution of the Preliminary Official Statement and the Official Statement to prospective and actual purchasers 9 Llama Company Ability to calculate the fiscal impact of any Statements by the Governmental Accounting Standards Board (GASB) on the refunding of outstanding debt. There are two GASB Statements which set the standards for the accounting for refundings which result in the defeasance of debt Llama Company is familiar with both statements and would work with the City and its CPA to determine the fiscal impact on the City's financial statement from refunding The following is a short discussion of each GASB Statement which govern the recording of transactions involving refundings which result in defeasance of debt "GASES " - Advance Refundings Resulting in Defeasance of Debt" This Statement provides guidance on accounting .for advance refundings which result in defeasance of debt recorded in the long-term debt account group The proceeds of the new debt should be reported as an "other financing source - proceeds of refunding bonds" in the fund receiving the proceeds. Payments to the escrow agent from resources provided by the new debt should be reported as an "other financing use - payment to refunded bond escrow agent." Payments to the escrow agent made with other resources of the entity should be reported as debt service expenditures This Statement also provides guidance on disclosures about advance refundings for all governmental entities regardless of where the debt is recorded The economic gain or loss should be disclosed and is the difference between the present value of the old debt service requirements and the present value of the new debt service requirements, discounted at the effective interest rate of the new debt and adjusted for additional cash paid ' GASBS23 - Accounting and Financial Reporting forRejtndings of Debt Reported by Proprietary Activities" This Statement establishes standards of accounting and financial reporting for current refundings and advance refundings resulting in defeasance of debt reported by proprietary activities that is, proprietary funds and other .governmental entities that use proprietary fund accounting. Refundings:involve the issuance of new debt whose proceeds are used to repay previously issued debt. The proceeds may be used immediately for this purpose ("current refunding"), or may be placed with an escrow agent and invested 10 Llama Company until they are used to pay principal, interest and call premium, if any, on the old debt at a future time ("advanced refunding"). For current refundings and advance refundings resulting in defeasance of debt reported by proprietary activities, this Statement requires that the difference between the reacquisition price and the net carrying amount of the old debt be deferred and amortized as a component of interest expense in a systematic and rational manner over the remaining life of the old debt or the life of the new debt, whichever is shorter. On the balance sheet, the deferred amount should be reported as a deduction from or an addition to the new debt liability. In addition, this Statement makes the disclosures required by GASBS 7 applicable to current refundings reported by proprietary activities. Proposed Schedule of Events and Assignment of Responsibilities for All Participants Including Time Estimates for Each Step. Please refer to Appendix e for a schedule of events for a typical refunding bond issue. Please note that in some cases there may be legal requirements for public hearings, such as TEFRA hearings or hearings relative to any sewer increase required for debt servicing. Therefore, each financing would require a schedule of events which is tailored to the requirements of each particular financing 11 MARKETING PLAN Llama Company BACKGROUND Llama Company believes that the City of Fayetteville's bonds have a number of uniquely attractive features that will make them extremely attractive to potential investors. These features include - Strong current financials and coverage ratios; State tax exemption and "bank -qualified" status; Current lack of municipal tax-exempt bonds in the market; and Positive profile and strong community support of the City and the Continuing Education Center (CEC) Project in particular. As a result, Llama Company anticipates strong demand across all maturities from all types of buyers, but especially from those who are either Arkansas residents or costate domiciled banks. These potential investors are shown graphically below. *,tines IS% andel Dlatdbution 12 Bwk MN%% 30% N 5 Imafhtf Mix aa_ POItWo OS IndMWu.N 20% 1 1 1 1 1 1 1 �1 1 1 1 Llama Company Although the inherent strengths of the City's bonds will make them easy to sell, Llama Company believes that the City can benefit from utilizing a strong and well crafted marketing plan for their pending financing. There are two important goals that should be the main focus of any successful marketing planmaintaining the strong interest of the current investors in the City's bonds and expanding this universe of existing bondowners If successfully implemented, a well -crafted marketing plan will stimulate an increased demand not only for the City's current CEC refunding bond issue but also for all future financings of the City. As a result, the City can leverage this demand and borrow moneys at the lowest possible rates. Through Llama Company's long and successful business relationship with the City, the firm believes it is the best suited investment banking company to execute this marketing plan and serve as the City's senior manager for this upcoming financing. MARKETING PLAN As the City's senior manager, Llama Company recommends a multi -step, proactive marketing approach to the sale and distribution of the City's securities. Such an approach is a continuous process rather than a procedure undertaken only during pricing, and it will begin with a sophisticated premarketing survey of possible buyers of the City's debt. This survey will isolate and identify the Investors who will determine the ultimate success of the City's sale. The survey will be followed by a series of discussions with these potential investors which will highlight and emphasize the credit and trading strengths of the City's bonds. Finally, Llama Company's marketing strategy includes a commitment to the trading and support of the City's securities in the secondary market. As a result, potential investors can take added confidence in the continuing liquidity and viability of the City's bonds Pre -Marketing. Survey. Steps critical to reducing the City's interest costs must be taken during the premarketing period of the financing. During that time, Llama Company will undertake a comprehensive survey of all existing holders as well as any potential investors of the City's debt. As the City's senior manager for its last three transactions over the past four years, Llama Company has unrivaled knowledge of and experience with current holders of the City's outstanding bonds. Furthermore, as one of the few full-service investment banks which consistently makes a primary and secondary market in all Arkansas municipal tax-exempt securities, Llama Company is frailly aware of any buyer who may have had previous interest in owning securities similar to the City's bonds. By cross- matching these two lists, Llama Company can proactively target all potential buyers of the City's bonds well before the final pricing date. This will permit Llama Company to customize the structure of the City's 13