Public Finance in Banking

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When letters of credit were teamed with municipal bonds, we were involved in the initial offerings and played a major role in structuring the financings, advising letter of credit banks and working with the rating agencies. In the continuing evolution of credit‑enhanced financings, Kutak Rock has remained in the forefront in structuring transactions dependent upon credit or liquidity support, ranging from long‑term fixed rate financings to variable rate demand and commercial paper programs.

Our firm represents major domestic and foreign banks in this area of practice and we have acted as bank counsel, bond counsel, disclosure counsel or underwriter’s counsel in more than 2,200 public finance transactions in which a letter of credit provided credit enhancement to the issuer. These financings have an aggregate principal amount of more than $52 billion. As the volume of transactions suggests, our experience with letters of credit covers the full range of issues associated with such instruments and, in particular, bankruptcy and preference issues. We have experience in drafting direct-pay, standby letters and confirming letters of credit and in addressing structuring and rating agency issues for these instruments.

We also help solve another recent challenge facing banking institutions—the increasing need to sell or participate out the risk assumed under any lending transaction. In our solution, the lender in the primary transaction retains its relationship with the borrower but is able to share or “participate out” the risks and the fees with one or more other participants. Frequently, our firm is engaged to represent our clients in both the primary lending transaction and in the accompanying participation. To facilitate the participation initially, we prepare standardized participation provisions which are incorporated into the transaction documents for each primary lending transaction. We are then able to use our knowledge of the underlying documents to skillfully negotiate the participation of those documents with other financial institutions. Because we are well known to many of the lenders and their counsel in this area, we have the advantage in efficiently and effectively completing the participations. We also are sensitive to the needs of our clients, who have the ongoing legal and business obligation to face their borrowers even if all of the liability has been participated to other institutions.

With the increase in secondary market, derivative and synthetic products, our firm has remained in the forefront of representing and advising municipal issuers, borrowers, providers and credit enhancers in transactions utilizing interest rate hedges, forward commitments and liquidity support.