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As we wrote about a few weeks ago (here), we are in the middle of a dry spell when it comes to new guidance from the IRS. Thankfully, the National Association of Bond Lawyers (“NABL”) recently released exposure drafts of several model issue price certificates. The draft certificates are the product of collaboration between NABL and the Securities Industry and Financial Markets Association (“SIFMA”) and are intended to help implement the final issue price regulations (discussed here). The final regulations take effect on June 7, 2017 and the draft certificates should help facilitate agreement between issuers, financial advisors, underwriters, purchasers, bond counsel, and any other interested parties within a working group. In order to finalize the drafts in advance of the effective date of the final regulations, NABL has requested comments to be submitted no later than Friday, April 14, 2017.
Included are draft certificates for negotiated sales, competitive sales, and private placements. Within the category of negotiated sales, there are three separate draft certificates. One certificate applies when at least 10 percent of each maturity is sold to the public, one applies when 10 percent of some but not all maturities are sold to the public, and one for when less than 10 percent of each maturity is sold to the public. Finally, there is a consolidated negotiated sale certificate (conceptually, the elder wand of issue price certificates for negotiated sales) that can be edited to apply in any of the three specific scenarios. A copy of the consolidated certificate is attached below.
Attachment
CONSOLIDATED FORM FOR NEGOTIATED SALES
$[PRINCIPAL AMOUNT]
[BOND CAPTION]
ISSUE PRICE CERTIFICATE
The undersigned, on behalf of [NAME OF UNDERWRITER/REPRESENTATIVE] (the [“Underwriter”)][“Representative”)][, on behalf of itself and [NAMES OF OTHER UNDERWRITERS] (together, the “Underwriters”),] hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”).
Select appropriate provisions below:
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Sale of the [Bonds][10% Maturities]. As of the date of this Certificate, for each Maturity of the [Bonds][10% Maturities], the first price at which a Substantial Amount of such Maturity of the Bonds was sold to the Public is the respective price listed in Schedule A.
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Initial Offering Price of the [Bonds][Undersold Maturities].
(a) The Underwriter[s] offered the [Bonds][Undersold Maturities] to the Public for purchase at the respective initial offering prices listed in Schedule A (the “Initial Offering Prices”) on or before the Sale Date. A copy of the pricing wire or equivalent communication for the Bonds is attached to this Certificate as Schedule B.
(b) As set forth in the [Bond Purchase Agreement][Notice of Sale and bid award], the Underwriter[s] [has][have] agreed in writing that, for each Maturity of the [Bonds][Undersold Maturities], [it][they] would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Offering Period for such Maturity, nor would [it][they] permit a related party to do so. Pursuant to such agreement, [the Underwriter][none of the Underwriters] [has][have] [neither][either] offered [nor][or] sold any Maturity of the [Bonds][Undersold Maturities] at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the Offering Period.
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Defined Terms.
(a) 10% Maturities means those Maturities of the Bonds shown in Schedule A hereto as the “10% Maturities.”]
(b) Issuer means [DESCRIBE ISSUER].
(c) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate maturities.
(d) Offering Period means, with respect to an Undersold Maturity, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date ([DATE]), or (ii) the date on which the Underwriter[s] [has][have] sold a Substantial Amount of such Undersold Maturity to the Public at a price that is no higher than the Initial Offering Price for such Undersold Maturity.]
(e) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than a Regulatory Underwriter or a related party to a Regulatory Underwriter. The term “related party” for purposes of this Certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly.
(f) Regulatory Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public).
(g) Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is [DATE].
(h) Substantial Amount means ten percent.
[(i) Undersold Maturities means those Maturities of the Bonds shown in Schedule A hereto
as the “Undersold Maturities.”]
The undersigned understands that the foregoing information will be relied upon by the Issuer[ and the Borrower] with respect to certain of the representations set forth in the [Tax Certificate] and with respect to compliance with the federal income tax rules affecting the Bonds, and by [BOND COUNSEL] in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of Internal Revenue Service Form 8038[-G][-GC][-TC], and other federal income tax advice it may give to the Issuer [and the Borrower] from time to time relating to the Bonds.
[UNDERWRITER][REPRESENTATIVE], as
[Underwriter][Representative]
By:______________
Name:______________
Dated: [ISSUE DATE]
