Louisiana selects Wells Fargo, JPMorgan for Garvee bond deals

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After disqualifying two of the county’s largest investment banks because of their gun policies, the Louisiana State Bond Commission chose alternate firms to work on the state’s first two Garvee bond deals.

Wells Fargo and JPMorgan will be the co-senior underwriters on the grant anticipation revenue vehicle bonds expected to be issued next year, the commission decided unanimously on Thursday.


Louisiana expects to issue between $80 million and $95 million of Garvees in the first sale with Wells Fargo as the book-runner. Between $90 million and $155 million will be sold in the second sale with JPMorgan as the book-runner.

State Treasurer John Schroder, who chairs the commission, served on the evaluation team that recommended the two firms.

“The team did a great job,” Schroder said. “It was my first experience and it’s a lot of work.”

Schroder didn’t say anything about the movement he spearheaded in March to scrutinize firms that enacted firearms policies in the wake of the Feb. 14 gun massacre of 14 students and three adults at Marjory Stoneman Douglas High School in Parkland, Florida.

Schroder brought up the issue after receiving a letter from the previous state treasurer, U.S. Sen. John Kennedy, R-La., questioning the policies of two banks.

That led the commission on a vote of 7-6 last month to block Citi and Bank of America Merrill Lynch from working on any of the Garvee deals. The question of whether those firms would be allowed to work other state bond deals was raised, but not answered.

Citi’s policy asks new retail sector clients to adhere to “best practices” policies for firearms sales, including a minimum age of 21 for gun buyers and not selling bump stocks or high-capacity magazines. BAML said it plans to stop lending to companies that make assault-style guns for non-military purposes.

Matthew Block, the governor’s executive counsel and representative on the commission, asked staff if bond issuance costs submitted by Citi and BAML for the deals were evaluated against the fees submitted by other firms.

State Bond Director Lela Folse said Citi and BAML’s fee proposals were available, but the commission instructed staff not to evaluate them.

There were no other questions before the bond commission voted.

After the two Garvee bond sales next year, the state plans to issue as much as $400 million between 2020 and 2022 to advance critical transportation projects, according to commission documents.

Thirteen firms submitted proposals to be the state’s senior underwriter on the Garvee bonds, and all were asked to complete a series of questions about whether bank policies infringe on citizens’ rights to own guns.

All firms, including Citi and BAML, said they had no policies that affected gun ownership.

While answering the state’s questionnaire, Wells Fargo offered a broader explanation.

“Wells Fargo's chief executive officer, Tim Sloan, has said that the correct way to address these issues would be through political and legislative procedure,” the bank said in its response to the commission questionnaire. “Wells Fargo does not believe that the American public wants banks to decide which legal products consumers can and cannot buy.”

In a separate report Tuesday, the Louisiana State Auditor’s office said local governments across the state paid about $6.7 million in issuance costs that exceeded the average costs of similar bond issuances from January 2013 through June 2017.

“Local governments that paid higher costs may have been able to obtain the same services at lower costs had they known what other local governments paid for similar bond-issuance type services,” the report said.

The auditor’s office recommended creating a tracking system for actual bond issuance costs to help local governments compare prices, a recommendation that the bond commission said it would implement.

Another point auditors raised concerned the use of competitive bidding when selecting bond issuance professionals such as underwriters, financial advisors and bond counsel.

Only 38% of 74 municipalities, school boards, parish governments, and sheriffs surveyed by the auditor said they use competitive bidding to select bond issuance professionals.

“We found that competitively bidding out services could potentially enable local governments to reduce their bond issuance costs by approximately $1.2 million annually,” the report said. “The commission could potentially help local governments reduce their borrowing costs by providing resources to help them use competitive bidding to select bond issuance professionals, as recommended by national best practices.”

In a response to the report, the commission said it will work to implement a database on competitive bidding.

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Garvee bonds Sell side Revenue bonds Transportation industry Bank of America Merrill Lynch Citigroup State of Louisiana Louisiana
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