Official Notice Of Sale

The Ashfield Regional Sanitary District publishes an OFFICIAL NOTICE OF SALE inviting bids on a new general obligation issue. A syndicate manager preparing a bid would expect that notice to tell her:

1. A.The date, time and place of the sale, the maturity schedule, the good faith deposit required, the basis for determining the winning bid, and the name of bond counselCorrect. The notice of sale sets the rules of the competitive bidding process.
2. B.The issuer's complete audited financial statements and detailed economic dataThat level of disclosure belongs in the official statement.
3. C.The reoffering yields at which the bonds will be sold to the investing publicReoffering yields are set by the winning syndicate after the award, not by the issuer in advance.
4. D.The takedown and selling concession the syndicate members will earnSyndicate economics are set in the syndicate agreement, not in the issuer's notice.

Why: The official notice of sale is the issuer's invitation to bid in a competitive sale. It sets the ground rules: the date, time and place of the sale, the par amount and maturity schedule of the bonds, the good faith deposit required of bidders, any limits on coupon or price, the basis on which the winning bid will be determined, the name of bond counsel, and the expected delivery date. What it does not contain is the syndicate's own economics or the yields at which the bonds will be reoffered, because those are decided by the bidding syndicate, not by the issuer.

In a COMPETITIVE municipal bond sale, the issuer awards the bonds to the syndicate whose bid:

1. A.Produces the lowest net or true interest cost as specified in the notice of saleCorrect. Interest-cost minimization is the award standard.
2. B.Arrives first at the issuer's officeWrong. Timeliness qualifies bids; cost wins them.
3. C.Includes the largest underwriting spreadWrong-but-tempting. Spreads are the SYNDICATE'S economics - the issuer compares its own cost.
4. D.Offers the highest coupon ratesWrong. High coupons RAISE the issuer's cost.

Why: Competitive sales are awarded on lowest net or true interest cost per the official notice of sale; TIC incorporates the time value of money while NIC is the simpler aggregate calculation. Citation: competitive sale award procedures; notice of sale terms. Takeaway: cheapest borrowing wins - by the notice's stated cost formula.