Thursday, December 13, 2018

Paying More for Less

JPS sold $65 million bonds at a premium of $71 million at the end of November.  The professional service fees, excluding underwriting, was $346,250.  They were half of what they were estimated to be earlier this year but more than what the Rankin County School District paid last year for a $100 million bond issue.  The fees are posted below.

Butler Snow (Bond Counsel): $128,500
Mississippi Development Bank: $65,000
Balch & Bingham (Issuer's Counsel): $30,000
Government Consultants, Inc. (Financial Advisor): $74,004
S&P Ratings (Ratings Agency): $32,000
May Law Firm (Blue Sky Survey): $5,000
Trustmark (Paying Agent/Trustee): $8,500
Imagemaster: $2,245
Total: $346,250

The underwriter, Siebert, Shanks, & Cisneros, charged $482,116.72
Total:  $828,366

The transaction fees are cheaper than what JPS estimated them to be last summer:

Steve Edds of Lord Snow (Bond Counsel): $225,000
Government Consultants (Financial Advisor): $207,500
Mays Law Firm & Young Law Group (Underwriter's Counsel): $100,000
Disclosure Counsel (Unknown firm): $15,000
Trustee: $10,000
Trustee Counsel: $10,000
Spence Flatguard (State Bond Attorney): $1,000
Rating Agency: $55,000
Mississippi Development Bank: $70,000
Mississippi Development Bank Counsel: $30,000
Miscellaneous: $5,000
Total: $728,500

Siebert, Shanks, & Cisneros (Underwriter): $410,690
TOTAL: $1,139,190

The fees were thus $382,250 cheaper than estimated but they are still more expensive than what Rankin paid last year for a $100 million bond issue that used some of the same firms for professional services.

Lord Snow (Bond Counsel): $46,925
Government Consultants (Financial Advisor): $51,791

Balch & Bingham (Issuer's Counsel): $20,000
Mississippi Development Bank: $70,000
Peoples Banks (Trustee): $1,500
Harrel & Rester (District Counsel): $32,128
S&P (Rating Agency): $59,800
Adams & Reese (Underwriter's Counsel): $28,600
Spence Flatguard (State Bond Attorney): $1,000
TOTAL: $312,994.

The Rankin County fees do not include the underwriting fees of Morgan Stanley. The district said its fee would be $950,000 for an issue of  $178 million.  JJ estimates it to be approximately $533,707 (100/178 = 53%).  The total amount of the professional service fees including the estimated amount would be $846,700.

Yup, Lord Snow charged a little more than a third of what it charged JPS.  Government Consultants only charged RCSB 70% of what it charged JPS even though the Rankin school bond issue was 53% larger than the Jackson school bond issue.  Hmmm...... what is wrong with this picture?

Note: Only the first two pages of the bond summary are posted below.  The invoices for the professional services fees make up the rest of the collection of documents. 

Meanwhile, here is the guts of the bonds for the finance junkies to read.


Anonymous said...

Who is (are) "Government Consultants"?

Anonymous said...

Perhaps, counseling JPS might have required more billable hours than RCSD?

Anonymous said...

I imagine this site's highlighting the fees is what caused the numbers to be more reasonable.

good work

Anonymous said...

Hells bells. There are chancery court judges in Mississippi who won't let you close an estate without filing an itemized bill for the attorney's time and fees. Why in the world does BS and Balch and the like get to submit these flat fee statements that get paid without question-FROM PUBLIC FUNDS??? Don't get me wrong, I understand this is complex work and requires a great deal of time and resources...but C'MON MAN!

Brylcream Commando said...

Selling bonds to prop up a FAILING school district with a rapidly declining tax base takes a hell of a lot more hoodwinking. Thus the higher costs.

Anonymous said...

I get what you are trying to say, but you can't tell me that Butler Snow found the JPS work just as easy to do as the Rankin work. I'm sure the project involved far more emails, calls and second and third sets of eyes by the legal team.

Not to mention that BS probably had to carry a lot more of the load for the less qualified finance team.

Anonymous said...

The fact that the bonds sold for a premium and at an attractive rate says that sophisticated institutional investors have a different opinion of JPS' and Jackson's finances and outlook than this blog does.

Time will tell.

Anonymous said...

Did this price come with a case of K-Y Jelly ????

Anonymous said...

Will someone please tell me exactly what the underwriter does to deserve $482,116.72?

Anonymous said...

I can tell you this, that in my line of work, customers who I think or know will be a bigger problem, not pay on time, and require a little more hand holding than normal, do not get preferential pricing. It may be a hunch, but maybe Rankin is a better customer than JPS.

Anonymous said...

The "sophisticated institutional investors" understand that the school district will soak the monolithic voting bloc Democrats who comprise 85+% of the local population for whatever amount of taxation necessary over the life of the issue to pay the freight. They know exactly who is getting screwed and that the screwing won't relent until the bonds are paid off. The also fully understand the political irony that a self-professed redistributionist "radical" mayor has greenlighted the fleecing.

Anonymous said...

Butler Snow should have to give an account of the difference in fees.

Anonymous said...

@12:10 Junk bonds, there is a sucker for every deal(polished turd). Remember lucrative timber investments.

Anonymous said...

12:10 pm

Detroit has bond holders too.

Today those bond holders have much less money.

Not supposed to happen that way....but

Pappy Odaniel said...

@12:10...yes, sophisticated investors like PERS.

Anonymous said...

Attn 1:37. Why does the state retirement fund put retirement fund investments in (junk rated) municipal bonds. What makes Muni's attractive is their tax free status which is moot when held in retirement funds. Regardless of the status on bond income (taxable or in municipal bonds, tax free) the money coming out in retirement is taxable.

Anonymous said...

BS = Butler Snow(job)

Posted for a friend.

Anonymous said...

"Money for nothin' and chicks for free
Now that ain't workin' that's the way you do it" Dire Straits

Anonymous said...

Odd that BS and Government Consultants got this work. They are “Republican” firms. There are other “Democrat” firms.

Anonymous said...

This is government fuzzy math 101. You always intentionally announce a higher estimate from the outset, and when the actual costs are inevitably less, you make yourself look good and keep the sheeple happy.

Anonymous said...

Is not Butler Snow the law firm accused of complicity with "Lamar Adams Timber Investments"? If so, when will we hear the last of this kind of stuff committed by these "sophisticated lawyers"? Is there no way to "Shut them down." Maybe (God forbid) fines and expungements.I for one am tired of this stuff. If no other solution, lets bring John Grissom in and have him write a novel. The only problem is, it may be too strange and unbelievable to make a good story.

Anonymous said...

What about the $8 million Lord Snow is charging the Mississippi Development Bank to issue $875 million in bonds for a little known state agency. The new auditor needs to look into this and other bonds that have been issued. The state's Municipal Gas Utilities Board is going to issue these in January, 2019! Mr. Auditor - do what you should and investigate. PEER did a review of this board back in the 90's - not very favorable! And this is going on!

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