This article originally appeared in GFOA Today and is reprinted here with permission from the publisher.
When states and local governments issue public debt, they experience a flurry of activity with underwriters, attorneys, market intermediaries, advisors, and service providers. In the best of circumstances, everyone comes together to achieve a quick and seamless closing process. It’s simple – governments want the proceeds from their issuance so that they can move forward with their priorities and projects.
Once a bond transaction closes, most of the people involved in the process move on. But the issuer and the Trustee/Paying Agent are in it for the long haul, servicing the debt, and acting in the interests of bondholders. Thinking of Trustee/Paying Agent Services as a long-term relationship keeps things moving smoothly throughout the entire tenor of a bond.
Just like long-term relationships in our personal lives, it’s important to make the right choice in selecting a provider for Trustee/Paying Agent Services. Issuers should take an active role in making that choice carefully and consider the combination of fit and service level early in the planning process. It should not be an afterthought just prior to closing.
Governments need to know they can count on their service provider to meet the day-to-day responsibilities set forth in a bond’s indenture, administering provisions, communicating with bondholders smoothly, handling principal and interest payments, and providing tax reporting.
They are also well advised to choose a service provider that can handle unexpected situations or complex issues. The world can change rather quickly, whether in a global situation such as the COVID-19 pandemic, or in market conditions, such as new DTC rules and their administrative impacts.
“No matter what happens, public issuers want to make sure that bondholders are treated with fairness and integrity,” says Jennifer Fredericks, Vice President and Principal, Business Development for BNY Mellon’s US Corporate Trust Public Finance group.
A Trustee/Paying Agent acts as an issuer’s public face to bondholders. As a proven steward within financial markets, BNY Mellon’s service on behalf of bondholders puts that public face in a positive light. It’s our focus. Our public debt specialists across the U.S. have decades’ worth of experience administering a wide range of trust appointments and providing expert insights into new market trends. We take a flexible approach and customize our services to meet clients’ needs – regardless of transaction size or issuer type.