Wells Capital, a division of Wells Fargo Bank, agreed to purchase $5,000,000 in a short-term security bond offering from the City of Compton.
IFS Securities, the City’s investment banker, had several buyers interested in the City’s note offering.
“The city manager’s recovery plan and the positive action taken since his arrival last August was a key factor in obtaining the order for the whole note issue from Wells Capital,” explained Craig Walker, IFS Securities vice president, public finance. “By utilizing a lockbox structure of revenues which is a first for Los Angeles County we were able to provide security to Wells Capital and flexibility for the City,” he added.
The City of Compton’s finance team for the offering included IFS, underwriter; Comer Capital Group, LLC, financial advisor; Peck Shaffer & Williams, LLP, bond counsel; Sevfarth Shaw, LLC, special counsel; and US Bank, trustee.
“After an extensive review of the City of Compton’s finances, it’s great to have one of the largest banks in California validate Compton’s credit worthiness, especially in light of the financial rumors the City had to address in 2012,” City Manager G. Harold Duffey, said. This is the stated opinion of Duffey as the bank has not expressed a public opinion.
Duffey acknowledged that the TRAN was possible only with the support of the Los Angeles Board of Supervisors and Los Angeles County’s Administrator and Auditor Controller. The County agreed to establish a “lockbox system” in which proceeds that would normally be distributed to Compton would be held in trust and paid directly to Wells Fargo. This process, the first of its kind in Los Angeles County, reduces the creditors risk and allows the City to receive an advance on its tax allocations.
Last summer the City had to fend off speculation that it would file bankruptcy by September. “It’s February 2013 and we are still in business,” Duffey added. The City, like most cities in California, depends on sales and property taxes that flow from the state or county government and those distributions are cyclical. However, expenses occur on a monthly basis, which sometimes lead to cash flow issues. “Cities usually address cash flow needs by issuing short-term internal borrowing from other funds,” reported Brandon Comer, Comer Capital Group, the City’s Financial Advisor.
“I think we are moving the City in the right direction,” Duffey said. The City hired a new auditor to resolve issues from the unsigned 2010/11 audit. CalPERS dropped its lawsuit against the City and the City is in good standing with its retirement accounts. It’s also important to note that this debt will be repaid by June 28, 2013, with remaining 2012/13 property and sales tax allocations.
“IFS is pleased to have served the City and assist in their entry into the capital markets. Institutional credit access is a key component for cities and counties to manage their finances properly. By assisting Compton on their first TRAN we feel proud to have made that capital market access possible with such a high quality institution as Wells Capital,” commented IFS Securities President Alex McKenzie.
About IFS Securities
IFS Securities, Inc., is a full-service independent broker-dealer who understands retail and wholesale advisory networks as well as global capital markets. Based in Atlanta, GA, IFS Securities has 32 offices in 17 states and Puerto Rico and is a member of FINRA, MSRB and SIPC. For more information about IFS Securities, visit the website at www.ifssecurities.com or call 678-690-8523.
SOURCE IFS Securities