| How does First River Advisory ensure that the yields on its clients' bonds are minimized? |
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As a result of these activities, First River Advisory has been able to report to clients that their bonds were sold at the most favorable yields available. There have been no instances where, at the final pricing, firm orders for bonds materially exceeded the principal amount of bonds offered. Moreover, the benefits provided to investment analysts ensures that subsequent First River Advisory transactions receive close attention when they come to market.
These activities can have a "bottom line" impact. In 1997, First River Advisory collaborated with an investment banking firm in connection with the issuance by Chippewa County (MI) War Memorial Hospital of over $16 million of bonds. Because First River Advisory was not acting as the independent financial advisor, First River Advisory had no influence on the investment banking firm's pricing of these bonds. Well after the issue was closed, however, evidence surfaced that the yield on nearly $7 million of War Memorial's bonds maturing in 2014 was overly generous by perhaps five basis points (100ths of one percent). This scenario, unfortunately, demonstrates investment banking firms' all-too-frequent inability and/or unwillingness to price bonds aggressively for the benefit of the borrower (in this case, War Memorial).
In contrast, First River Advisory's diligent efforts as an independent financial advisor ensure that its clients are not disadvantaged by this lack of performance. Suppose a mispricing of this magnitude had occurred in connection with approximately $9.75 million of Chelsea Community Hospital's Series 1998 Bonds maturing in 2019, a transaction in which First River Advisory did act as financial advisor. If so, the present value of Chelsea's total debt service would have increased by nearly $64,000. That figure computes to approximately $6,550 per million dollars of bonds affected.
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