Advice to Solicitors on Their Role in a Municipal Bond Issue
You are probably not an expert in public finance, but you are an experienced attorney who has seen all sorts of legal issues that municipalities face. As the transaction moves forward, ask questions if you do not understand something—there are no stupid questions whether one dollar or millions of dollars of public funds are involved. The odds are, if you don't understand something, your client probably doesn't understand it either.
Don't accept "that's just the way it's done" as an answer. You and your client deserve clear answers to your questions. Here are a few examples of good general questions: To bond counsel, are there any thorny tax issues you are analyzing or any difficult disclosure issues you are considering? To the financial adviser, do you think the issuer's disclosure is appropriate? If at any point you feel uncertain or uncomfortable regarding the transaction, stop the train until you get comfortable.
• The official statement is your client's document, no matter who prepares it, so make sure it's accurate.
The prospectus in a bond issue is called an official statement, or OS. In many transactions, the financial adviser or the underwriter's counsel will draft the OS, but no matter who drafts the OS, under the law it is considered your client's—the issuer's—disclosure.
Because you represent and interact with the municipality on a daily basis, you know much more about the municipality than any of the other professionals involved in the financing. Be sure to carefully read the draft OS, and make sure your client carefully reviews it too. The OS usually contains a description of the municipal government and of the local area and economy—make sure all of that information is complete and accurate. Pension liabilities, OPEB (other post-employment benefits) liabilities, litigation and swap liabilities are areas of specific concern to regulators and investors and must be adequately described in the OS.
• Follow the Sunshine Law.
Make sure the official action to approve the debt taken by the governing body of your municipal client is in conformity with your required procedures, including the Sunshine Law. The Local Government Unit Debt Act may supersede some of your procedures; consult with bond counsel on this point.
• Understand your legal opinion.
In many cases, the bond counsel will prepare a draft of your legal opinion to be delivered at closing. Ask bond counsel to give you a draft of the opinion very early on in the course of the transaction. Review it carefully and make sure you are comfortable with the opinions you are required to render. Pay particular attention to opinions regarding outstanding or potential litigation. If there are any complicated litigation matters, be sure to review them with the other parties as soon as possible, and definitely before the preliminary OS is distributed.
• Get paid an appropriate fee.