Prior to scheduling a closing for a CHEFA issue, the parties to the transaction must be satisfied that the closing documents are in final form, all legal opinions to be given have been agreed upon, and the underwriter has prepared the Closing Memorandum. Documents may include Loan Agreements, Trust Indentures, the Official Statement, and standard items related to bond issuance. Additional closing items include copies of the purchase contract, tax agreement, UCC filings for the project, the bond insurance policy and certification of the ratings of the bonds.
A notice of public hearing regarding the bond issue is advertised in the newspaper of greatest circulation in the client’s service area, and a TEFRA hearing is held prior to the sale of bonds. This hearing gives members of the public the opportunity to appear, ask questions or offer comments regarding the proposed project to ascertain whether the project meets the public purpose required for tax-exempt bonds.
All documentation and reporting requirements must be addressed before the closing is scheduled. These may include the environmental reports for the project location, and completion of a tax questionnaire by the client relating to the project and the client’s business. The client’s completion of the tax questionnaire is the basis for determining the project’s eligibility for tax-exempt financing which is critical to ensure compliance with IRS regulations.
At the closing, representatives of the client institution and its legal counsel, along with the underwriter and its legal counsel will be present. Representatives for the Trustee, as well as the Trustee’s counsel, CHEFA representatives and its Bond Counsel and Special Counsel will also be involved in the closing process.
The closing is usually the most important part of each transaction, as it is the culmination of the transaction for the institution and is the time when bond proceeds become available. Bond proceeds are deposited in the Authority’s separate construction fund established for each project.
The closings are usually routine with representatives of the institution, underwriter, CHEFA and bond trustee present to review and sign legal documents at a pre-closing, usually held the day before the actual closing.
On the day of the closing, once everyone is satisfied that all the legal documents are properly executed, the underwriter wire transfers the bond proceeds to the bond trustee and other parties to the transaction. Once confirmation has been received for the wire transfers, the underwriter, bond trustee and bond counsel contact DTC (Depository Trust Company), at which time the bonds are released and the transaction is recorded. At this point, CHEFA, once it has confirmation that bond proceeds have been deposited in its accounts, can begin disbursing funds to pay for project related costs and costs of issuance.
