1982-07-07 Regular Meeting and Public Hearing

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C~ • Minutes, Regular Meeting and Public Hearing La Porte City Council, July 7, 1982, Page 4 • says, we agree to issue the bonds and. that's a binding com- mitment only in the sense that they are expressing an intent to issue the bonds if you can work all the details out. After the date the IDC takes that action, the user can expend funds and subsequently get those funds reimbursed out of the bond proceeds, so in effect they can take money out of their own pocket, put it in and then get it back at below interest rate and get interim financing which will usually be at a higher interest rate, and. when the bonds are issued, then pay off the interim financing and have a lower interest rate. What happens is, after official action is taken, a period elapses which may be anywhere from several weeks to several months while you work out the details of financing, during which the user of the facility goes on and works on building his facility. The details of the bond issue are worked out. When the details of the bond issue are worked out the IDC actually issues the bonds. And this typically will involve 5 or 6 financing documents, depending on the nature of the financing, whether or not it is going to be secured by a mortgage, whether or not there will be a corporate guarantee • by a parent or an affiliate of the company using the facility. There will also generally be a trust indenture. A trust in- denture is the instrument which describes the bonds, talks about provisions of default under the bond issue. The other important thing the trust indenture does is, the IDC will assign all of its rights and interest in the loan agreement, its rights and interest that exist as security for the repay- ment of the loan to a corporate trustee, which is almost always a bank. The trustee will then administer the entire operation on behalf of the corporation and the holders of the bonds. What actually happens is, the money, as it is paid in, is not paid to the IDC but rather to the trustee on behalf of the IDC, so that in point of fact, after the bonds are issued, IDC itself has virtually nothing to do with the bond issue. Everything is administered by the trustee. All the funds that flow into the trustee and are disbursed to the bond holders. The disbursement of the monies for the construc- tion of the project are disbursed by the trustee on behalf of the corporation. At the time the bond issue closes and it is funded and the money arrives to pay for the bonds, the money will be deposited in a construction fund or a private fund or some kind of trust account with the trustee. The trustee will make disbursements to the party building the facility upon certification to the effect that costs have been expended that affect the construction of the facility. About the only • time an IDC will ever have any involvement after the bonds are