Municipal Bond Underwriting

In order to fund operations, often including building projects like schools, roads, and hospitals, states and local governments issue municipal securities, most commonly municipal bonds. The owners of those bonds typically receive interest payments periodically on the bond, and the bond is set to return the principal at a fixed date in the future. The main draw for investors is that the interest paid by municipalities receives special tax treatment that a comparable corporate bond would not, making the income more attractive for the investors, and making it cheaper for municipalities to raise funds through these offerings.

Many municipalities and municipal related entities, such as county hospitals, rely on bond issuances to raise capital for their continued operations. Whether it’s a General Obligation Bond or Revenue Bond, the underwriting process is essentially the same. As a municipality or related entity, you rely on the Municipal Advisory Firms and Underwriting Firms to properly guide you on any bond issuance. Often times these very same Advisors and Underwriters are so keen on collecting their fees that they will, knowingly or unknowingly, lead these municipalities astray. The results of which may be debt coverage misrepresentations (as what happened with the municipalities in Puerto Rico) or improper structuring of the bond issuance itself (as what happened with Auction Rate Securities and Maximum Auction Rates). A municipal bond attorney can help with working through litigation that involved municipal securities issued by state and local governments.

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