Title
Proposed Appointment of Underwriter Syndicate
Body
Agenda of: March 26, 2025
Item No.: 2025-065
Amount: N/A
TO: The Honorable
Board of Directors
Great Lakes Water Authority
FROM: Suzanne R. Coffey P.E.
Chief Executive Officer
Great Lakes Water Authority
DATE: March 26, 2025
RE: Proposed Appointment of Underwriter Syndicate
MOTION
Upon recommendation of Nicolette Bateson, Chief Financial Officer/Treasurer, Financial Services, the Board of Directors (Board) of the Great Lakes Water Authority (GLWA), authorizes the Chief Executive Officer (CEO) to appoint an Underwriting Syndicate Structure with the following roles and firms:
• Bookrunning Senior Manager - Siebert Williams Shank & Co. LLC
• Co-Senior Manager - B of A Securities Inc.
• Co-Managers - Goldman Sachs & Co. LLC, Huntington Securities, Inc., Jefferies LLC, Loop Capital Markets LLC, Morgan Stanley & Co. LLC, and Stifel, Nicolaus & Company, Inc.;
for a duration of three (3) years through March 25, 2028, with the option to extend the initial term to maintain ongoing coverage with Board approval; and authorizes the CEO to take such other action as may be necessary to accomplish the intent of this vote.
BACKGROUND
GLWA appoints a syndicate of Underwriters to provide bond underwriting services for all negotiated bond transactions. The Great Lakes Water Authority (GLWA) Debt Management Policy has established a process and cadence of underwriter syndicate selection. The policy states:
Underwriter Selection and Syndicate Management
Process and Cadence of Underwriting Syndicate Selection
For long term debt not issued through a State or Federal program such as the State Revolving Fund program, GLWA will appoint a syndicate of Underwriters (the “Underwriting Syndicate”) through a competitive procurement process as outlined in GLWA’s Procurement Policy. The Underwriting Syndicate will provide bond underwriting services for all negotiated transactions that take place during a three-year term, but the initial term may be extended by the Board as appropriate to maintain ongoing coverage. Exceptions to the use of the Underwriting Syndicate shall be reported to the Board in advance of any transaction.
Senior Manager Selection
GLWA will appoint a book-running senior manager to the Underwriting Syndicate. The selection criteria will include, but not be limited to, the following:
• The firm’s ability and experience in managing transactions similar to those contemplated by GLWA
• Prior knowledge and experience with GLWA, if applicable
• The firm’s willingness to risk capital and demonstration of such risk
• Quality and experience of personnel assigned to GLWA’s engagement
• Financing plan presented
• Underwriting fees
Co-Senior Manager Selection
GLWA may consider the appointment of a co-senior manager to the Underwriting Syndicate.
Co-Manager Selection
Co-managers will be appointed to the Underwriting Syndicate and selected to complement the distribution capabilities of the senior manager and co-senior manager, if applicable. The number of co-managers appointed to specific transactions will be a function of transaction size and the necessity to ensure maximum distribution of GLWA’s bonds.
Selling Groups
GLWA may establish Selling Groups in certain transactions in order to broaden the reach to potential investors.
Underwriter’s Counsel
In any negotiated sale of GLWA debt in which legal counsel is required to represent the Underwriter, the appointment will be made by the Senior Manager while also being acceptable to GLWA.
Underwriter’s Discount
GLWA’s Registered Municipal Advisor will evaluate the proposed Underwriter’s Discount against comparable issues in the market. If there are multiple Underwriters in the transaction, the Chief Financial Officer will determine the allocation of liabilities and fees among the Underwriters, with input from GLWA’s Registered Municipal Advisor.
All fees and allocation of liabilities will be determined prior to the sale date; a cap on Management Fee (if any), expenses and Underwriter’s Counsel will be established and communicated to all parties by the Chief Financial Officer or GLWA’s Registered Municipal Advisor. The senior managing underwriter will submit an itemized list of expenses charged to members of the underwriting group. Any additional expenses must be substantiated.
Syndicate Policies
For each negotiated transaction, the Chief Financial Officer will, with input and advice from GLWA’s Registered Municipal Advisor, approve a Syndicate Policy that will describe the designation and priority policies governing the upcoming bond sale.
GLWA may seek to give certain classes of investors (such as Retail, Institutional or ESG Investors) priority during an order period in order to encourage best execution. GLWA will require the senior manager to allocate bonds in accordance with this priority policy as well as to seek to make reasonable and fair allocations of bonds to syndicate members and the selling group. In all cases, GLWA will require the senior manager to comply with MSRB regulations governing the priority of orders and allocations.
JUSTIFICATION
In accordance with the GLWA Procurement Policy, the GLWA Procurement group led a competitive solicitation for underwriting services. Attached is the Procurement Report summarizing the results of that solicitation. Fifteen proposals were received in total. Of the fifteen proposals received, eight firms were selected through the proposal review process to take part in interviews with the evaluation panel. Following scoring of proposals, interviews and fees, the evaluation panel recommends the appointment of Siebert Williams Shank & Co. LLC as bookrunning senior manager, B of A Securities Inc. as co-senior manager and Goldman Sachs & Co. LLC, Huntington Securities, Inc., Jefferies LLC, Loop Capital Markets LLC, Morgan Stanley & Co. LLC, and Stifel, Nicolaus & Company, Inc. as co-managers.
Of the firms selected, Siebert Williams Shank & Co. has served as the GLWA’s bookrunning senior manager, Goldman Sachs & Co. LLC has served as co-senior manager and Morgan Stanley & Co. LLC and Loop Capital Markets LLC have served as co-managers on recent bond transactions.
The new proposed appointment is for a duration of three (3) years through March 25, 2028. The initial term may be extended by the Board as appropriate to maintain ongoing coverage.
Proposed Underwriter Compensation: The Takedown Fee in a bond transaction is the compensation paid to the underwriter for selling the bonds. It is expressed as a dollar amount per $1,000 of the par amount of the transaction. Best practices dictate that issuers strive for the best balance between the yield for each maturity and the takedown to achieve the lowest overall cost of financing. GLWA’s Financial Advisor, PFM Financial Advisors completed a benchmarking analysis of the proposed fees associated with each proposal and confirmed that most were within a competitive range between $2.25 and $3.00 per $1,000 (see attached). Pricing was incorporated as a component of overall scores. Historical takedowns paid by GLWA for uninsured bonds are shown on attachment 1.
BUDGET IMPACT
Any fees associated with the underwriting syndicate are paid out of the bond proceeds except for incidental internal costs.
COMMITTEE REVIEW
The GLWA Audit Committee reviewed this matter on March 14, 2025. The Audit Committee unanimously recommended that the Board of Directors appoint an Underwriting Syndicate Structure with the following roles and firms:
• Bookrunning Senior Manager - Siebert Williams Shank & Co. LLC
• Co-Senior Manager - B of A Securities Inc.
• Co-Managers - Goldman Sachs & Co. LLC, Huntington Securities, Inc., Jefferies LLC, Loop Capital Markets LLC, Morgan Stanley & Co. LLC, and Stifel, Nicolaus & Company, Inc.;
for a duration of three (3) years through March 25, 2028, with the option to extend the initial term to maintain ongoing coverage with Board approval; and authorizes the CEO to take such other action as may be necessary to accomplish the intent of this vote.
SHARED SERVICES IMPACT
This item does not impact the shared services agreement between GLWA and the Detroit Water & Sewerage Department (DWSD). It should be noted that fees for bond transactions are deducted from a pro-rata percentage of the bond proceeds when a market-based transaction encompasses funding for DWSD. DWSD also reimburses GLWA for SRF transaction costs incurred. Representatives of DWSD was included in the procurement process with one person serving as evaluator and another person as observer.