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About Financial Advisory

Since 1946, FirstSouthwest has been a trusted leader in public finance. We provide expert financial advisory services to more than 1,600 clients across 25 offices in 14 states.

Benefits
Our financial advisory professionals work together across geographical and practice group boundaries to help each client seamlessly receive the benefits of the entire Firm’s expertise. These benefits include:
  • Our professionals proactively share with each client the Firm's collective specialized expertise, local knowledge and national experience
  • Our professionals are accessible and responsive to each client.
  • FirstSouthwest’s direct participation in the capital markets affords financial advisory clients with real-time local and national market sensitivity to make informed decisions.
  • FirstSouthwest’s in-house expertise in arbitrage rebate, government investment pools, investment advisory, disclosure, trading and municipal underwriting is readily available to each financial advisory client.
Areas of Expertise
FirstSouthwest maintains deep and proven expertise across a variety of public finance sectors:
  • Airports
  • Benefit Plan Services
  • Convention Centers/Hotels
  • Correctional Facilities
  • General Obligation
  • Healthcare
  • Higher Education
  • Housing
  • Leasing
  • Mass Transit
  • Ports
  • Public Power
  • Public-Private Partnerships
  • Rapid Transit
  • School Districts
  • Special Districts/Development
  • State Revolving Funds
  • Streets and Highways
  • Student Loans
  • Toll Roads
  • Water and Wastewater

    To learn more about our financial advisory expertise in specific sectors, please visit our Sector Expertise page.

 

Case Studies

Mecklenburg County, North Carolina

3/13/2013 12:00:00 AM

Mecklenburg County, North Carolina

 FirstSouthwest has served as swap advisor to Mecklenburg County since 2008 and as financial advisor since 2010. During this time, FirstSouthwest has assisted the County with monitoring and reporting quarterly swap performance, execution of refunding transactions, partial termination of existing interest rate swaps, review of debt policies, structuring and bidding of an investment agreement and preparation of materials for rating agencies. Most recently, FirstSouthwest worked with the County to develop a comprehensive restructuring plan that would:

 

1)       reduce or eliminate the County’s swap exposure at breakeven or positive savings;

2)       reduce and diversify variable rate risks;

3)       provide a solution for liquidity facilities expiring in early 2013; and

4)       capture available refunding savings.

 

Simultaneous with the restructuring plan, the County also issued its annual new money GO bonds bid competitively and Taxable Limited Obligation Refunding Bonds sold on a negotiated basis.

 

FirstSouthwest first conducted an RFP process for underwriters and credit providers requesting structuring ideas and credit solutions.  FirstSouthwest evaluated, summarized, reviewed with the County and ultimately developed a multi-faceted recommendation that would most effectively meet the County’s objectives at the lowest cost.  Our recommendation included 1) terminating $155,400,000 notional amount of fixed rate swaps that were currently hedging certain outstanding COPS and GO WINDOWS bonds, 2) refunding a like amount of variable rate GO bonds to fixed rate, 3) restructuring one of the County’s 2013 fiscal year GO maturities to carve out capacity to make the swap termination payment and 4) converting existing Variable Rate Demand COPS to a direct purchase mode and floating rate note index to reduce and diversify variable rate risks.  Principal amortization was restructured on certain series to achieve overall level cashflow savings and the transaction produced overall positive net present value savings. In addition to this restructuring, FirstSouthwest also recommended traditional refunding of certain fixed rate GO Bonds that resulted in net present value savings of $7.6 million or 8% of refunded bonds.

 

During the implementation process, FirstSouthwest coordinated all activities including scheduling of documentation review meetings, advised on structure, worked with counsel and the County to ensure all appropriate approvals were met, reviewed and shadowed underwriter numbers, prepared all rating agency materials, coordinated meeting logistics and assisted with follow-up items, commented on and negotiated terms and conditions of the documents, served as bidding agent on the escrow and coordinated closing items.   The diversification strategy included using a mix of variable rate products, staggering the terms of variable rate debt and using a mix of credit providers. 

 

Over the years, FirstSouthwest has served Mecklenburg County as both financial advisor and swap advisor. In October 2011, FirstSouthwest served as financial advisor on the following transactions:

§  $49,000,000 General Obligation Bonds, Series 2011A

§  $51,000,000 Taxable General Obligation Bonds, Series 2011B (Qualified School Construction Bond (QSCB))

§  $164,015,000 General Obligation Refunding Bonds, Series 2011C

§  Partial Termination of seven interest rate swaps totaling $136,750,000 with three separate counterparties

§  Bidding agent on the QSCB sinking fund

§  $12,000,000 Special Obligation Bonds, Series 2011

The creative elements of these transactions were primarily a function of the many moving pieces, coordination of separate senior managers and tax treatment and complexity of the underlying swap hedges on the County’s variable rate bonds.

The swaps themselves were originally assigned to a number of transactions some of which had been refunded over time. This resulted in some of the swaps losing the ability to use tax-exempt bond proceeds to fund any swap termination payments and the County had to use cash to fund those termination payments. We worked closely with the County to minimize the cashflow impact in FY 2011. We also worked closely with bond counsel and our swap desk to ensure that the remaining portion of the swaps would retain their ability to use tax-exempt proceeds to fund termination payments in the future.

On the day of the general obligation bond pricing, FirstSouthwest seamlessly coordinated the separate senior managers that had been assigned to the new money and refunding portions of the transactions as well as the partial terminations of seven separate swaps. The timing of the bond pricing and swap terminations was an integral component of the County achieving its desired savings level. FirstSouthwest also bid out an open market escrow, but ultimately recommended the use of State and Local Government Securities.

Another element of creativity was in the structuring of the QSCB as a bullet payment and a developing sinking fund investment schedule that would maximize interest earnings. The sinking fund was bid the week after pricing.

A separate part of the financing plan was the issuance of Special Obligation Bonds to finance the County’s solid waste projects. This was a brand new credit and only a handful of similar projects had been completed in North Carolina. FirstSouthwest worked closely with the County and bond counsel to draft documents that would provide the County adequate flexibility and protection to ultimately achieve a credit rating that was one notch below the County’s AAA GO ratings.

FirstSouthwest continues to serve as swap advisor to Mecklenburg County on an ongoing basis. Mecklenburg has a variety of swaps that remain outstanding and FirstSouthwest provides a quarterly swap report to the County that details swap performance, payments and updated fair market values. This report is produced jointly with the Charlotte’s financial advisory team as underlying bond information is also incorporated into the report.

FirstSouthwest has also worked closely with Mecklenburg County on credit and rating issues, liquidity facility renewal and general advisory services both during and between bond sales. We are also in the process of monitoring Mecklenburg’s outstanding swap transactions for opportunities to terminate the existing swap and refund the underlying variable rate bonds with fixed rate.

In our role as financial advisor, FirstSouthwest's underwriting and trading desk routinely provides recommendations regarding the following matters based on their active market involvement and extensive institutional investor relationships:

§  Structure

§  Call options and premiums

§  Yields

§  Coupons

§  Placement of Term Bonds and pricing

§  Serial Bonds and Pricing

§  Capital Appreciation Bonds and pricing

§  Cost effectiveness of insurance

§  Credit aspects

§  Underwriters’ takedown and spread

§  Syndicate rules

§  Allocation of bonds

In short, these capabilities provide an enormous advantage to the County and differentiate FirstSouthwest from “independent” advisory firms, which do not have actual market involvement and capabilities. Although the County may only require some of these services to be provided by FirstSouthwest, the expertise of all the professionals in these auxiliary areas is shared with the public finance bankers and utilized when specific questions arise.


 

Austin, Texas

11/1/2011 12:00:00 AM

FirstSouthwest served as Senior Manager for a $237,530,000 Water and Wastewater System Revenue Refunding Bond in November 2011. The bonds were rated Aa2/AA/AA- and had a final maturity of 2041. The bonds were a combination of new money and refunding, so FirstSouthwest recommended bifurcating coupons on maturities of the callable refunding bonds 2022 through 2026, and utilizing sub-5.00% coupons to make the refunding more efficient. After the initial order period, FirstSouthwest had a solid book of orders for maturities 2014 through 2031 with substantial over-subscription on the 5.00% coupon maturities in 2016 through 2026. The bifurcated refunding maturities with 3.00% to 4 3/8% coupons in 2024 through 2026 were not fully subscribed, along with the serial bonds in 2032 and 2033, and 2036 and 2041 term bonds. At the conclusion of the order period, there was an $80 million unsold balance.

Repricing Oversubscribed & Unsold Bonds and Commitment to Underwrite: FirstSouthwest had an indication of interest for $20 million of the 2041 5.00% term bond at 10 bps over the scale and another indication for $10 million bonds with a deep discount structure at the original scale. FirstSouthwest negotiated a better scale on the 2041 5.00% with an adjustment of only 5 bps (higher) and created the bifurcated 2041 at a lower discount dollar price of 98.275 (4 3/8% instead of 4.25% coupon) at the original pricing wire yield. On the sub-5.00% coupon refunding bond maturities in 2024 through 2026, without an order book, FirstSouthwest offered and underwrote $2.5 million of bonds per maturity at the original yields to preserve the present value savings of the refunding. On the oversubscribed 2016-2026 maturities, FirstSouthwest lowered yields 1 to 8 basis points. At the time of the commitment to underwrite, the account had reduced the $80 million long unsold position and underwrote $32.53 million.

Commitment of Capital: FirstSouthwest made a significant commitment of capital to this utility revenue bond underwriting. The syndicate had $32.53 million unsold balance with FirstSouthwest’s 52% liability being $16.915 million.

FirstSouthwest put in stock orders of $14.985 million, and had a total capital commitment of $31.9 million. In the end, FirstSouthwest generated $471 million in orders for this utility revenue bond transaction.

Michigan Finance Authority 2012

12/5/2012 12:00:00 AM

Michigan Finance Authority
2012

On December 5, 2012 the MFA Series 2012 Unemployment Obligation Assessment Revenue Bond Deal was selected for the 2012 National Bond Buyer Deal of the Year award.

Early 2012 saw significant negative rating agency actions with respect to several major credit provider banks, including Citibank in its role as LOC provider on the MFA Series 2011 UI VRDBs.  Early in March, MFA reassembled its financing team and began work on refinancing Series 2011 with a structure that would lock in historically low long-term interest rates, reduce exposure to the impact of any further deterioration in the LOC provider’s credit ratings, and reduce the probability of large increases in the annual Obligation Assessment (OA) imposed on Michigan’s participating employers across the life of the bond issue.  This effort began with fresh cash flow analyses produced by FirstSouthwest and progressed to the examination of structural elements and concepts that might be effectively utilized to produce the optimum mix of scheduled non-callable and optionally callable debt at the lowest all-in cost to MFA.  FirstSouthwest’s previous experience as FA on the Texas UI transactions combined with its highly customized cash flow model was critical in this analysis, allowing for very rapid comparative analyses of various combinations of structural components and pricing assumptions.  The final structure produced through that iterative process resulted in a $1.462 billion fixed rate non-callable Series 2012A, a $1.2 billion fixed rate callable Series 2012B that offered investors an extremely high level of predictability with respect to call date, and a $250 million VRDB Series 2012C that would be called with the first available excess revenues above scheduled debt service. 

Concurrently, FirstSouthwest utilized its experience with the Texas UI transaction to lead the ratings process with all three of the major rating agencies.  Based on the concerns that had emerged in the rating process with the Texas issue, FirstSouthwest worked closely with the MFA, Treasury, Michigan UIA and underwriters to develop a ratings strategy that, combined with the final structure, would ultimately result in the transaction being the first, and currently still the only UI transaction to receive “AAA” ratings from Moody’s, S&P and Fitch.

Armed with three AAA ratings, a highly predictable amortization for the Series B callable bonds, and a long history of excellent UI tax collections rates, FirstSouthwest accompanied the MFA, Treasury and UI on a four day investor road show trip to Chicago, Boston, New York and Detroit to provide potential investors with an in-depth look at the security, credit, management expertise, and cash-flow-predictability features of this unique and precedent setting UI financing. 

With the investor interest generated by the road show still fresh, FirstSouthwest suggested that the underwriters price the Series B callable bonds first, which was met by very heavy demand from investors seeking a little bit of additional yield with very low risk.  The heavy over-subscription for those bonds allowed for a subsequent pricing of the non-callable Series A bonds at extremely aggressive interest rates for an all-in TIC of 1.80%.
 

CTRMA 2013 Refunding

4/30/2013 12:00:00 AM

CTRMA 2013 Refunding – Case Study

In April 2013, FirstSouthwest served as financial advisor to Central Texas Regional Mobility Authority (“CTRMA” or the “Authority”) on a complex refunding of three series of bonds, a $167 million senior lien debt issue, a $66 million subordinate lien TIFIA loan, and a $45 million subordinate lien Build America Bond issue.  This refunding was undertaken to create annual cash flow savings and eliminate major covenant or bond related issues for each individual series.  This case study highlights FirstSouthwest’s expertise and client relations to request improved ratings on the bonds, aggressively market the debt through a nationwide roadshow and investor conference, and obtain excellent pricing in the midst of a heavy spring calendar.

Over the past eight months, rates have been at or near historic lows, which prompted CTRMA and FirstSouthwest to review refunding candidates.  Rates had decreased to an extent where gross savings were achieved with the Authority’s inaugural debt issues from 2005, its 2005 Senior Lien Bonds and the 2005 TIFIA loan.  Compounding this refunding opportunity was that the Senior Lien Bonds were wrapped by National Public Finance Guarantee Corp (“National”), a bond insurer who had included onerous bond covenants in the original financing, preventing the Authority from adding new toll-road projects to the Turnpike System.  Moreover, due to the successful performance of the Authority’s 183A facility, TIFIA loan prepayments were set to kick in which would accelerate principal amortization of the TIFIA loan by 14 years, and would accelerate even faster if a new managed lane and toll road projects were added to the system (MoPac Improvement Project and SH 71 Projects, respectively).

Due to upcoming sequestration cuts that would affect Build America Bond (“BAB”) subsidy payments, CTRMA began to review refunding the $45 million Taxable Series 2010 Subordinate lien bonds that were issued as BABs.  When originally financed, FirstSouthwest worked with the financing team to include an extraordinary par call provision if a change in law occurred which would alter the amount of subsidy provided.  When sequestration cuts were signed into law in March 2013, CTRMA decided to include the BAB refunding into the refunding program

While the bond issue was being structured and assembled, FirstSouthwest worked closely with CTRMA leadership to design a rating strategy to argue that the Authority could obtain a rating upgrade on its outstanding debt.  FirstSouthwest worked with the Traffic and Revenue consultant to create a new traffic study that reflected historical transactions on both roll roads, and also worked with the General Engineering Consultant to produce a report to that monitored progress on outstanding construction projects and an updated projection for ongoing operations and maintenance.  With hard data in hand, FirstSouthwest created a rating agency presentation that was led by CTRMA and presented to Moody’s and S&P.  These presentations were well received, given the underlying strength of the current local and state economy, growing transactions on both toll roads, and high but not unrealistic projections for future residential and commercial development in the tollroad study areas.  In the end, Moody’s upgraded CTRMA by one notch, to Baa2 for the senior lien bonds (stable outlook) and Baa3 for the subordinate lien bonds (stable outlook).  S&P reaffirmed their ratings (Senior: BBB- [stable outlook], Subordinate: BB+ [stable outlook]), but did note that they would likely reconsider ratings once construction on the Manor Expressway was complete and the tollroad was operating as planned.

Once ratings were obtained, CTRMA began the marketing process by recording a netroadshow and embarking on a national roadshow to advertise the bonds to major institutional bond investors around the country.  In the middle of the marketing process, CTRMA and FirstSouthwest attended the JPMorgan Transportation Investor Conference and held eight one-on-one sessions with bond investors.  All together, over a 10 day period, CTRMA and FirstSouthwest met with over twenty bond investors in person or over the phone, and were able to communicate the credit in a timely and thorough fashion.

FirstSouthwest structured the refunding into three series, a $156 million fixed rate senior lien issue, a $30 million 3 year soft put issue, and a $104 million fixed rate subordinate lien issue.  The two fixed rate issues were senior managed by JPMorgan, and the soft put was sole managed by Loop Capital.  In order to increase present value savings and have a manageable portfolio of non liquidity backed variable rate debt, FirstSouthwest structured a $30 million soft put structure, which CTRMA will continue to remarket over time until maturity.  FirstSouthwest worked with JPMorgan to split the TIFIA refunding into senior and subordinate portions, which increased average annual savings and would not adversely impact coverage ratios.

In the days leading up to pricing day, market tone was firm to improving on credit spreads for the Authority bond issues.  As pricing began, orders began to come in for CTRMA.  Over a one and a half hour period, CTRMA had over $3.2 billion in orders on the $260 million senior and subordinate issues, an aggregate oversubscription rate of over 12x.  This resulted in yields tightening 6-15bps across the yield curve.  For the soft put, it was 5x oversubscribed, resulting in yields decreasing 5bps and a stepped coupon of 9% (a similar, higher rated Texas toll road issue netted a 10% stepped coupon rate in late 2012).  Overall, the refunding created $29.3 million on gross savings, and $17.5 million or 5.97% on a present value basis. 

CTRMA was ecstatic about the refunding results on pricing day.  The market was extremely firm, and the senior managers did an excellent job selling the bonds in a busy marketplace.  Through each step, FirstSouthwest led the financing process, providing advice to the client when it was needed, relying on consultants and investment banks to provide their respective services, and ultimately serving as fiduciary as the Authority navigated the circuitous boundaries of a complex refunding.  FirstSouthwest is extremely proud to serve as financial advisor to CTRMA, and will use this refunding as a touchstone to future engagements with this and other financial advisory clients. 

Recent Transactions

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DateAmountClient NameClient LocationTransaction TypeSector
6/27/2013$1,385,000.00Montgomery Co MUD 98, TXTexasUT Bds, S13Municipal Utility District
6/27/2013$2,325,000.00Shrewsbury, MAMassachusettsGO BANs, S13Town
6/27/2013$65,805,000.00Grapevine, TXTexasGO Bds, S13City
6/27/2013$3,965,000.00Grapevine, TXTexasTax Notes, S13City
6/27/2013$10,000,000.00Cleburne ISD, TXTexasUT Schl Bldg Bds, S13Independent School District
6/27/2013$1,400,000.00Williamson Co MUD 15, TXTexasUT Bds, S13Municipal Utility District
6/26/2013$1,300,000.00Nahant, MAMassachusettsRANs, S13ATown
6/26/2013$2,717,000.00Nahant, MAMassachusettsGO BANs, S13BTown
6/25/2013$95,290,000.00Socorro ISD, TXTexasUT Schl Bldg Bds, S13Independent School District
6/25/2013$7,205,000.00Brazosport Wtr Auth, TXTexasWtr Sup Sys Rev Rfdg Bds, S13Water Authority
6/25/2013$3,830,000.00Prosper, TXTexasGO Rfdg Bds, S13Town
6/25/2013$5,235,000.00Prosper, TXTexasComb Tax & Srpls Rev CO S13Town
6/25/2013$3,045,000.00Galveston Co MUD 39, TXTexasUT Bds, S13AMunicipal Utility District
6/25/2013$1,595,000.00Euless, TXTexasWW&SS Rev Bds, S13City
6/25/2013$8,000,000.00Beverly, MAMassachusettsGO BANs,S13City
6/25/2013$18,000,000.00Wachusett RSD, MAMassachusettsGO RANs, S13Regional School District
6/24/2013$9,300,000.00Whiteface ISD, TXTexasUT Schl Bldg Bds, S13School
6/24/2013$2,200,000.00Texarkana, TXTexasWW&SSS Rev Bds, S13City
6/24/2013$3,370,000.00Palo Pinto ISD, TXTexasUT Schl Bldg & Rfdg Bds, S13Independent School District
6/24/2013$4,500,000.00Holyoke, MAMassachusettsGO BANs, S13City
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Case Studies

  • CTRMA 2013 Refunding

  • Austin, Texas

  • Mecklenburg County, North Carolina

  • Michigan Finance Authority 2012

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