san antonio water system board selection of bond underwriting pool, 2001

8/9/2019 San Antonio Water System board selection of bond underwriting pool, 2001

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A G E N D A I T E MN O . ^ 3

TO: San Antonio Water System Board of TmsteesFRO M : Eugene E. Habiger, General, USA F (Ret.), President/Chief Executive OfficerSUBJECT: APPOINTMENT OF A POOL OF BOND UNDERW RITING FIRMS

Board Action D ate: June 12, 2001S U MMA R Y A ND R E C O MM E N D A T I O N :The attached resolution appoints a pool of bond undervyriting firms to assist the System inrestmcturing its currently outstanding bonded debt and in financing its proposed capitalimprovement programs.

The System currently has $728,455,000 of long term, fixed rate debt outstanding.Schedule 1 depicts the annual principal and interest requirements for this debt untilmaturity.The Series 1992 bonds, which total $292,020,000 or 40% of the amount ou tstanding,become callable on May 15, 2002.The callability of these bonds plus the current favorable interest rate markets providean opportunity to restmcture the System's outstanding debt in anticipation offinancing the projected capital program requirements over the next ten years of over$2 billion. Schedule 2 depicts the projected capital improvement program s for thisperiod of time by core business.Preliminary analyses indicate that the restmcturing would result in a present valuesavings to the System.Appointment of the pool of underwriting firms at this time would allow forcompletion of a transaction as early as September, 2001 should changes in the creditmarkets dictate.The standard process of requesting and evaluating proposals based on experienceand qualifications using the System 's decision analysis tool was utilized. Firmswere categorized based on their designation as national, regional, or SMWB E. TheContracting Department was informed of this process and observed the proposalevaluation meeting.


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Appointment of a Pool of Bond Underwriting Firms Agen da Item No . 33Page 2

Based on the results of the evaluation process, the following pool of underwritingfirms is recommended:National Firms Regional FirmsA.G. Edwards & Sons, Inc. Dain Rau scher, IncorporatedBear Steams & Co., Inc. M.E. Allison & Co. Inc.Goldman Sachs & Co. Morgan Keegan & Company, Inc.JPMorgan Chase & Co. Southwest Securities, Inc.Morgan Stanley & C o. IncorporatedSalomon Smith Barney, Inc.SMWBE FirmsApex Pryor SecuritiesSamuel A. Ramirez & Co., Inc.Siebert Brandford Shank & C o., L.L.C.Southwestem Capital Markets, Inc. The recom mended pool consists of fourteen firms. The specific syndicate foreach individual transaction would consist of eight to twelve firms, dependingupon the size and complexity of each transaction. Oral interviews would be conducted prior to each fransaction to determine

the firm best suited to serve in the role of senior manager. Following designation of the senior manager and formulation of a plan offinance, including sizing and stmcture recommendations, other members ofthe specific syndica te wou ld be formulated. Each syndicate would reflect abalance of national, regional, and SMW BE firms. Inclusion as a mem ber of subsequent syndicates would take intoconsideration a firm's performance on previous transactions. A minimal ornon-performing firm would be subject to removal from the poo l. Firms not part of the initial pool recommended above, may be considered forfuture inclusion based on interest in providing service to the System, as maybe evidenced by submission of timely and meaningful reports and analyses.


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Appointment of a Pool of Bond Underw riting Firms Agenda Item No. ^^Page 3

Based on the result of oral interviews conducted Ma y 30 with the six nationalfirms, Salomon Smith Bamey, Inc. is recommended to serve in the capacityas senior manager on the initial transaction. Salomon Smith Bam ey, Inc. isrecommended for this role due to their superior approach and sfrategy torestmcturing the S ystem 's outstanding debt and plan of finance to address theSystem 's capital improvem ent needs over the next several years.

The Management Services Committee was briefed on the approach and calendar of eventsfor this matter.Staff recomm ends approval of the attached resolution.F I N A N C I A L I M P A C T :The appointment of the pool of underwriting firms creates no immediate contractual orfinancial obligation to the System.Once the size and stmcture of the bond issue is finalized and a sale date is determined, apurchase agreement will be negotiated with the senior manager. Based on recent experiencein the market place estimated underw riting fees could range from $4.50 to $6.00 per bond.S U P P L E M E N T A R Y C O M M E N T S :

The System's co-financial advisory team of Estrada Hinojosa and First Southwest assistedstaff in the formulation of this recommendation, with Estrada Hinojosa serving in the leadrole.Requests For Proposals were distributed May 8, 2001.Nineteen proposals were received by the due date of May 18, 20 01 .The proposals were evaluated by three staff members from SAWS, two representatives fromEstrada Hinojosa, and one representative from First S outhwest.

The City's Public Utilities Supervisor was apprised and informed of this process andrecommendation.


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Appointment of a Pool of Bond Underwriting Firms Agenda Item No.Page 433

Ralph E. Hub;Chief Financial OfficerAPPROVED:

Tugene E. Habiger,General, USAF (Ret.).President/Chief Executive Officer


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R E S O L U T I O N N O .OF THE SAN ANTONIO WATER SYSTEM BOARD OFT R U S T E E S A P P O IN T I N G A P O O L O F U N D E R W R I T IN GFIRM S CONS ISTING O F A.G. EDW ARDS & SON S, INC. , APEXPRYOR SECURITIES, BEAR STEARNS & CO., INC. , DAINRAUSCHER, INCORPORATED, GOLDMAN SACHS & CO. ,JPMO RGA N CHASE & C O. , M. E . ALLISON & CO . , INC. ,MOR GAN KEEG AN & COMPANY, INC. , MO RGAN STANLEY& CO. , INCORPORATED, SAMUEL A. RAMIREZ & CO. , INC. ,SALOMON SMITH BARNEY, INC. , S IEBERT BRANDFORDSHANK & CO. L .L .C, SOUTHWEST SECURITIES , INC. , ANDSOUTHWESTERN CAPITAL MARKETS, INC. TO ASSIST THESYSTEM IN THE RESTRUCTURING OF ITS CURRENTLYOUTSTANDING BONDED DEBT AND PROVIDINGF I N A N C I N G F O R F U T U R E C A P I T A L I MP R O V E ME N TPROGRAMS; DESIGNATING SALOMON SMITH BARNEY,INC. , I N T H E R O L E O F S E N I O R MA N A G E R F O R T H EINITIAL TRANSACTION CONDUCTED; DIRECTING THEP R E S I D E N T /C H I E F E X E C U T I V E O F F I C E R T O D E V E L O P ASET OF PROCEDURES FOR MANAGEMENT ANDADMINISTRATION OF THE POOL; F INDING THERESOLUTION TO HAVE BEEN CONSIDERED PURSUANT TOTHE LAWS GOVERNING OPEN MEETINGS; PROVIDING ASEVERABILITY CLAUSE; AND ESTABLISHING ANE F F E C T I V E D A T E

WHEREAS, San Antonio Water System (the "System") monitors itsoutstanding debt and investigates opportunities to manage this debt in an effective andefficient manner; andWHEREAS, current interest rate conditions and projected capital improvementneeds make it advantageous and pmdent for the System to consider a restmcturing of itscurrently outstanding debt; andWHEREAS, in order to proceed in a timely fashion with such restmcturing andfinancing for capital improvem ents, a pool of underwriting firms needs to be appointed toassist in the stmctu ring, marketing, and sale of debt; andWHEREAS, the System's standard process for solicitation and evaluation ofproposals for professional services has been completed; andWHEREAS, oral interviews have been conducted as a basis for designating oneof the underwriting firms to serve in the role as senior manager of the initial transactionto be completed; and


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01-171WHEREAS, guidance is necessary to provide an orderly process formaintaining a quality and effective pool of underwriting firms; andWHEREAS, the San Antonio Water System Board of Tmstees desires to (i)appoint a pool of underwriting firms consisting of A.G. Edwards & Sons, Inc., Apex

Pryor Securities, Bear Steam s & Co., Inc., Dain Rauscher, Incorporated, Goldman Sachs& C o., JPMorgan Chase & Co., M. E. Allison & C o., Inc., Morgan Keegan & Company,Inc., Mo rgan Stanley & Co., Incorporated, Samuel A. Ram irez & Co., Inc., SalomonSmith Bamey, Inc., Siebert Brandford Shank & Co. L.L.C, Southwest Securities, Inc.,and Southwestem Capital Markets, Inc. to assist the System in the restmcturing of itscurrently outstanding bonded debt and providing financing for fiiture capitalimprovement programs, (ii) designate Salomon Smith Bamey, Inc., in the role of seniormanager for the initial transactions conducted, (iii) direct the President/Chief ExecutiveOfficer to develop a set of procedures outlining management and administration of theunderwriter pool; now therefore:

BE IT RESOLVED BY THE SAN ANTONIO WATER SYSTEM BOARD OFTRUSTEES:1. That the following firms are hereby appointed to serve as the pool of und erwritingfirms to assist the System from time to time in the issuance of debt:

A.G. Edwards & Sons, Inc.Apex Pryor SecuritiesBear Steams & Co., Inc.Dain Rauscher, Incorporated.Goldman Sachs & Co.JPMorgan Chase & Co.M. E . AUison & C o., Inc.Morgan Keegan & Company, Inc.Morgan Stanley & Co., IncorporatedSamuel A. Ram irez & Co ., Inc.Salomon Smith Bamey, Inc.Siebert Brandford Shank & Co . L.L.C.Southwest Securities, Inc.Southwestem Capital Markets, Inc.

2. That Salomon Smith Bamey, Inc., is hereby designated to serve in the role ofsenior manager for the initial debt offering related to the restmcturing of existing debtand financing for capital improvements of the System.3. That the President/Chief Executive Officer is hereby directed to develop a set ofprocedures outlining management and administration of the underwriter pool, includingat a minimum provision for designation to serve as senior manager based on anevaluation process to be conducted for each transaction, provision for the rotation ofunderwriting syndicate members, evaluation of the performance of syndicate members.


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provision for the substitution of minimal or non-performing syndicate members, andprovision for recommending to the Board inclusion of underwriting firms not originallypart of the pool based on submission of timely and meaningful debt reports and analyses.4. It is officially found, determined and declared that the meeting at which thisresolution is adopted was open to the pubhc, and that public notice of the time, place andsubject matter of the pubhc business to be conducted at such meeting, including thisresolution, was given to all as required by the Texas Codes An notated, as am ended. Title5, Chapter 551 Government Code.5. If any part, section, paragraph, sentence, phrase or word of this resolution is forany reason held to be unconstitutional, illegal, inoperative or invalid, or if any exceptionto our limitation upon any general provision herein contained is held to beunconstitutional, illegal, invalid or ineffective, the remainder of this resolution shallnevertheless stand effective and valid as if it had been enacted without the portion held tobe unconstitutional, illegal, invalid or ineffective.6. This resolution becomes effective immediately upon its passage.

PASSED AND A PPROVED this the 12th day of June 200 1.

M. Mayor, Cha irmanATTEST:

san antonio water system board selection of bond underwriting pool, 2001

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