The role of the financial advisor is:
An official statement provides information about the debt and the issuer to prospective underwriters and investors.
The bond counsel prepares the legal opinion and an opinion on the tax-exempt status of the bonds. The legal opinion certifies that the issuer has complied with all federal, state, and local legal requirements governing municipal debt.
Most governments or agencies issuing bonds use a financial advisor (FA) to serve as their "bond market expert" and to protect their interest during the entire issuance process. Some political subdivisions or agencies have "in-house" advisors with bond expertise, but most hire outside financial advisors. The FA is usually paid a flat fee rather than a percentage of the bond issue. The FA helps the issuer make the most crucial decisions, such as what type of debt to issue, how to structure the debt, and whether to use a negotiated sale or competitive bid process.
An official statement provides information about the issuer's ability to service the debt. For general obligation bonds, it includes information on the government, its tax base, the current debt burden, history of tax collection and bond repayment, and future borrowing plans. For revenue bonds, an official statement will focus on the funding source for repayment of the bonds.
It also describes the purpose, amount, and type of issue, its maturity structure and interest payment schedule, call provisions, date and place of bidding, whether or not a bond rating has been applied for, the name of the counsel preparing the legal opinion, and where the bonds will be delivered.
The official statement will also indicate any maximum interest rate and discount, and include any disclaimer indicating a right to refuse any and all bids. Official statements are prepared by the FA for competitive sales and by the underwriter for negotiated sales.
The bond counsel is typically a specialized law firm hired by the issuer to prepare a legal opinion. The legal opinion is certification that the issuer has complied with all federal, state, and local legal requirements governing municipal debt. The bond counsel also indicates whether or not, in its opinion, the interest paid on the debt will be exempt from federal and state income taxes. Without a satisfactory opinion, bonds are virtually worthless in the tax-exempt market.
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