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Evaluation of Underwriter Proposals for Negotiated Municipal Bond Offerings

Author: GLENN L. STEVENS
Published in PAM, Vol. 4 No. 4

The debate continues about the most cost-effective method of
issuing municipal securities. The emergence of online securities
marketing will add a new dimension to this debate. Some analysts
argue that the competitive sale process is the most advantageous
because of the inherent protections of open bidding. Others argue
that a negotiated sale produces comparable financing costs and
affords issuers considerably more flexibility in the marketing of
municipal securities. However, the negotiated sale remains the
dominant bond marketing strategy. Thus, it is important for
issuers to have tools to accurately and fairly evaluate the actual
costs of proposed bond offerings. This paper reviews the techniques
that are available for comparing alternative pricing proposals and
examines their strengths and weaknesses. It includes a description
of a process that issuers of negotiated offerings can use to
determine the appropriateness of a proposed pricing along with a
description of a computer-based evaluation model.

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