MCC Ready to Roll on Financial Advisor

The day after the McHenry County College Board approved its no-bid deal with Equity One, Requests for Qualifications for bond adviser were due to be returned.

Replies were received from four “bond advisers.”

They are

  • Crowe Chizek and Company LLC (Michael A. Clayton)
  • Ehlers and Associates, Inc. (Steve H. Larson)
  • Harris, (Eric Anderson)
  • Hutchinson, Shockey, Erley and Co. (Timothy Stratton)

Crowe Chizek and Company recommends municipal bond insurance to enhance MCC’s credit rating.

Base fee for Crowe Chizek is $9,000 plus $1.50 per $1,000 of bonds issued. An additional fee of up to $2,500 would be charged if MCC wants to hire the firm for its annual continuing disclosure undertakings.”

Ehlers says its “Mr.Larson has served McHenry County College District No. 528 since 1988 as their independent financial advisor. In that role he has supervised 7 bond and debt issues totaling $34,660,000. Nearly all of these issues have been sold on a competitive bid bases where the College has received an average 8 bids…He also helped the College with financial planning that led to an operating rate increase.”

With regard to compensation, Ehlers states, “the method and amount of compensation is negotiable.” It points out that independent financial advisers are usually paid “on a percentage of the par amount of the bond issue subject to a minimum fee per issue.”

Tim Stratton, contact person for Hutchison, Schockley, Erley and Company, included the following sentence:

”More recently, Tim has done substantial work with McHenry County College on financial modeling for the land purchase and stadium financing.”

Stratton’s proposes a fee “in the range of $7.50 -$10 per thousand based on the par value of the bond issue.” Later, the proposal states, “However, for issues exceeding $20 million HSC will cap its fee at $8.50 a bond.” It points out that “the overall percentage is usually higher for a smaller issue and lower for a larger issue.”

Harris, represented by Eric Anderson, has this observation:

”At a proposed value of $26 million, this issuance would be the largest issuance on record for the College, and it Debt Certificates are used for the funding of the project, special care and analysis would need to be conducted in order to provide comfort that the debt service burden undertaken by the College would not cause stress on the College’s other operations.”

The Harris presentation has another interesting paragraph:

”Further, we understand that the considered project is part of a $140 million campus master expansion plan. We would initially surmise that this play would require referendum support, and would be pleased to provide the College with analysis showing the amount that could be self-funded (through debt certificates) and the impact that any referendum considered by the College would have on residents.”

Harris suggests “a percentage fee based approach, though we would be open to exploring other compensation alternatives should the College desire.”


Comments

MCC Ready to Roll on Financial Advisor — 2 Comments

  1. Cal, a buck fifty per $100 isn’t a bad fee for a financial advisor for a small bond issue, although they might be better off negotiating a flat fee among the qualified proposers. $7.50 is so outrageous it’s hard to even contemplate. Unless there’s something I don’t know about this deal I would ban a group making a proposal like that from doing any further business with the issuer.

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