Construction Financing

Pat O'Connell served as financial advisor for $880 million of bond anticipation notes: $180 million of variable-rate BANs sold from 1990 to 1993, $600 million of commercial paper sold from 1994 to 1997 and 2002 to 2007 and $180 million of fixed-rate one-year BANs sold from 1999 to 2001. After tax reform in 1986, issuers avoided arbitrage rebate by funding capital projects internally and reimbursing themselves from bonds. This procedure forced issuers to forego interest earnings on expended general funds. In 1989, when regulations changed to allow arbitrage on borrowed funds with a 95% spend-down over 24 months, Mr. O'Connell recommended that keeping funds invested and paying for capital projects from interim borrowing.

The structure he implemented for clients, after competitive underwriters' choice, funded 12-to-24 months' capital spending with variable-rate (and later, commercial paper and fixed-rate) bond anticipation notes. The BANs maximized arbitrage through investment of BAN proceeds short-term at a positive spread while keeping general funds invested. Mr. O'Connell also managed the process through which reinvestment of BAN proceeds was competitively bid on-line using MuniAuction.