Advice to Solicitors on Their Role in a Municipal Bond Issue
As a solicitor for a local government, authority or school district, you have one of the most challenging positions a Pennsylvania lawyer can hold. Your municipal client is a special type of entity, different from a private company but with legal challenges that run the gamut, ranging from general litigation to contracts, labor law to zoning, Right-to-Know Law to dog-bite law and just about anything else you can think of.
In most cases, you are not experienced in public finance. When your municipal client issues bonds to finance or refinance a capital project, your client will often retain a special counsel qualified in municipal finance, known as bond counsel. The bond counsel is an expert in the process of issuing debt and will quarterback the legal aspects of the bond issue.
So, does that leave you, as solicitor, with anything to do in a bond issue? Yes. You have an important role to fill, and with respect to certain aspects of the debt process, you play a key part in protecting your municipal client—the issuer.
Here is some advice regarding your role as solicitor in a bond issue:
• Make sure your client understands the roles of all the entities involved in the bond issue.
Your role should be clear to both you and your client: You are the municipality's general counsel, and you are there to protect your client's legal interests. But as for all the other parties involved in a bond issue, your client may be confused as to who does what and in whose interest they are working.
An important role for you is to make sure your client understands who all the actors are and whose interests they represent. The bond counsel usually considers your municipal client to be its client too.
Review the bond counsel's engagement letter to confirm that the bond counsel has identified the municipality as its client. Make sure bond counsel understands that you expect to be kept in the loop if there are any problems that could negatively affect your mutual client. The level of anticipated communication required of the bond counsel by the municipality may be confirmed in the bond counsel's engagement letter.
The financial adviser has a fiduciary duty to your client, but underwriters, bank lenders, investment providers and swap providers may have limited or no duty to your client. Make sure you and your client understand the duties and roles of these other parties. The bond counsel can help you sort this out.
• Kick tires and ask questions.