Reinvestment of Bond Proceeds
Kensington Capital Advisors, acting in the capacity of "Bidding Agent", assists borrowers with the process of securing investment agreements for the reinvestment of bond proceeds. Many bond issues, as well as some loans, involve proceeds being set aside in trust until they are either spent or used for debt service. Questions typically arise related to the optimal vehicle available to invest these funds until they are needed.
Kensington Capital Advisors represents the borrower, and coordinates with other professionals including bond attorneys, insurers, rating agencies, trustees and underwriters to evaluate specific constraints and requirements associated with the investment of bond proceeds. As "Bidding Agent" it is or responsibility to support the borrower with the following:
- Evaluation of permitted investments defined in the financing documents
- Assessment of borrower policies, requirements and risk tolerance
- Education on available investment vehicles and structuring advice
- Preparation of all bid material and coordination with bond professionals
- Bid execution, documentation and closing
Our expertise includes the following reinvestment agreements:
- Uncollateralized Deposits (GIC)
- Collateralized Deposits (REPO)
- Forward Delivery Agreements
- Float Agreements
- Security Portfolios
These reinvestment agreements can be used to service the following types of funds:
- Construction Funds
- Project Funds
- Capitalized Interest Funds
- Reserve Funds
- Debt Service Funds
- Escrows
The goal when investing bond proceeds is to maximize the interest rate differential between the bond yield and the proceeds reinvestment yield safely within the guidelines of any investment policy and specific bond covenants. Keeping bond proceeds in a bank account, money market fund or investment pool may satisfy liquidity needs, but may ignore the need to maximize yield. Investment return is often an essential part of project funding along with preservation of principal.
Kensington Capital Advisors supports its clients in answering the essential questions necessary to maximize their individual investment criteria. This ensures that every investment agreement is structured to take into consideration all aspects of a client's investment needs including: safety of principal, liquidity, time horizon, costs to implement and yield.