INDIANA BOND BANK RFI FOR QUALIFIED INDEPENDENT … · 2017-08-14 · (3) the entity adopts the legal documents to participate in the Program; (4) the entity elects the notional amount

INDIANA BOND BANK

RFI FOR QUALIFIED INDEPENDENT REPRESENTATIVE

DATE: March 13, 2017

TO: Qualified Independent Representative

RE: Indiana Bond Bank, Fuel Budgeting Program

Request for Information

The Indiana Bond Bank (the “IBB”) is providing a Request for Information (“RFI”) to

eligible firms for its Fuel Budgeting Program (the “Program”) to serve as a Qualified

Independent Representative (“QIR”) of the IBB in connection with the execution and delivery of

commodity swaps as part of the Program. The responses are due by email or fax on or before

12:00 noon (Eastern Standard Time) on Wednesday, April 5, 2017.

This is not an Invitation to Bid or a Request for Proposal under the Indiana Procurement

Code (Indiana Code 4-13-1.3 and Indiana Code 5-22). The IBB creates no obligation, expressed

or implied, by issuing this RFI or by receipt of any proposals submitted pursuant hereto. The

award of any contract as a result of this RFI shall be at the sole discretion of the IBB. Neither

this RFI nor any proposal submitted in response hereto is to be construed as a legal offer.

Background of the IBB

The IBB was created by the Indiana General Assembly in 1984. The purpose of the IBB

is to buy and sell securities and to make loans to political subdivisions of the State of Indiana

(the “State”). Since its creation, the IBB has issued over $21.6 billion in debt with

approximately $880.9 million currently outstanding. The Program is one of the most popular

programs offered by the IBB.

Fuel Program

Since 2009, the IBB has provided the benefits of the Program to certain local

governmental units in the State and certain State agencies. The Program provides those entities a

hedge against rising fuel prices for both diesel fuel and gasoline. This hedge is provided by

entering into commodity swap agreements with commodity swap providers for the benefit of the

entities. The entities purchase the fuel on their own based upon market conditions. A summary

of those commodity hedges since 2015 with respect to local governmental units, including

volume in gallons, pricing and number of participants, is attached hereto as ATTACHMENT A.

The IBB has entered into two commodity swap agreements that are currently in effect.

One is with Bank of Montreal, and the other is with Cargill, Incorporated. The commodity swap

agreements are attached hereto as ATTACHMENTS B and C.

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In order to participate in the Program, the following steps need to be taken:

(1) completion of an application by the entity, which includes historic and projected

fuel usage;

(2) the application is subject to review by the IBB Municipal Advisor (Crowe

Horwath LLP) and approval by the IBB Board of Directors;

(3) the entity adopts the legal documents to participate in the Program;

(4) the entity elects the notional amount of the volume of fuel up to 80% of its

projected usage;

(5) the IBB enters into the hedge with the commodity swap provider for the benefit of

the participating entities.

Traditionally, the IBB enters into a commodity swap with a “costless collar” for the

benefit of local units of government each December. Those units can then choose to renew their

participation in another costless collar each year. Additionally, the IBB has entered into

commodity swaps with a “cap only” for the benefit of certain State agencies. The Bond Bank

has entered into such swaps from time to time, and there has been no fixed timeline for this

structure.

Clarification of Information

It is the responsibility of each respondent to inquire about and clarify any aspect of this

RFI that it does not understand. Questions for clarification must be addressed in writing to Ron

Mangus via email at [email protected]. Written responses will be provided.

Respondents are advised that materials contained in the quotations are subject to the

Indiana Public Records Act (Indiana Code 5-14-3) and may be viewed and/or copied by any

member of the public, including news agencies and competitors. In the event that a respondent

submits any documents which the respondent believes are not subject to disclosure pursuant to

the Indiana Public Records Act, the respondent must: (1) conspicuously mark each such

document “CONFIDENTIAL” on each such page affected; and (2) clearly identify which

portion(s) of such page(s) are confidential.

Specifications/Qualifications/Statement of Work

The IBB is seeking to select a registered commodity trading advisor(s) to act as its QIR

for the purpose of assisting in the execution of commodity swaps for the Program. The firm

acting in this role must have demonstrated ability to assist the IBB in developing and executing

strategies designed to mitigate the risks associated with its commodities swap portfolio. The

selected registered commodity trading advisor must be adept at negotiating favorable commodity

swap agreement terms for municipal entities and provide those services to the IBB.

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Services Required

1. Act as a QIR, which meets all requirements of Title 17 Chapter I of the Code of

Federal Regulations Section 23.450 with respect to advising non-ERISA “Special Entities” as

defined in Title 17 Chapter I of the Code of Federal Regulations Section 23.401 under the Dodd-

Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). In

addition, make necessary representations and agreements to comply with the Dodd-Frank Act.

2. Assist the IBB with managing its commodity swap portfolio, including, but not

limited to, developing and executing portfolio management strategies.

3. Assist with negotiations of key documentation provisions.

4. Provide detailed reports, supported by independent quantitative analysis as

needed, to outline the rationale for any suggested initiatives. Those reports should address any

long-term implications of the commodity swap recommendations.

5. Participate in meetings and conference calls with the IBB, its consultants,

commodity swap providers, counsel and other team members as needed.

6. Provide guidance on statutory or regulatory matters related to commodity swaps,

including changes proposed or implemented by Congress, the U.S. Treasury, the Commodity

Futures Trading Commission and other regulatory agencies. Provide guidance on ongoing

compliance.

7. Provide such other swap commodity advisory services as requested by the IBB.

Please Limit your Responses to Six Pages

1. Make an affirmative statement that your firm is registered with the Commodity

Futures Trading Commission as a commodity trading advisor and is qualified to serve as a QIR.

Please provide a copy of your QIR Policies and Procedures as an appendix.

2. Provide name, title, location and brief background for key professional(s) that

would be affiliated with the IBB‘s commodity swap advisory assignments. Please include the

number of years of experience, number of years at the firm and experience applicable to those

transactions. Do not include resumes.

3. Utilizing no more than one (1) of the allotted six (6) pages, please highlight in

narrative form no more than three (3) engagements within the last two years in which your firm

has acted as a commodity trading advisor for entities that have goals similar to the IBB. Please

include the issuer name, commodity swap structure, the names of the commodity swap providers

and ratings.

4. Discuss your firm’s understanding of the IBB commodity swap portfolio, address

how your firm would approach a commodity swap advisory engagement with the IBB and

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include any strategies for addressing ratings concerns as they relate to the IBB’s commodity

swap portfolio and any other methods that could mitigate some of the risks associated with the

portfolio, including, but not limited to, swap documentation or structuring enhancements.

5. Utilizing no more than two (2) of the allotted six (6) pages, please discuss why

your firm is best suited to act as the QIR for the IBB.

Fee Proposal

The IBB will compensate the QIR based upon each completed commodity swap

transaction. Please provide pricing information for the cost of your services for each costless

collar and cap only transaction completed by the IBB. Fees will be paid upon the completion of

a commodity swap transaction. Please note that the IBB may enter into a commodity swap with

an alternative structure.

No Contacts

The IBB specifically requests that no contact concerning this request for quotation be

made with any member, officer or employee of the IBB (other than Ron Mangus), Crowe

Horwath LLP (its Municipal Advisor), Barnes & Thornburg LLP (its General Counsel),

Maverick Sales Solutions, Inc., d/b/a Maverick Energy Consulting (its consultant), or the State

Treasurer's Office during the selection process. Failure to honor this request will be viewed

negatively in the selection process for commodity trading advisory services with respect to the

Program.

Dates and Selection Information

Please provide your response by e-mail, to [email protected] or by fax at

(317) 233-0894 on or before 12:00 noon, on Wednesday, April 5, 2017. It is anticipated that a

selection will be made during the week of April 10, 2017. The IBB will select the proposer

which is the most qualified to serve as the IBB’s QIR. The selection shall be at the sole

discretion of the IBB and shall be based upon experience, the fee proposal and any other quality

or characteristic deemed in the best interests of the IBB and the Program.

mailto:[email protected]

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ATTACHMENT A

SUMMARY OF COMMODITY HEDGES SINCE 2015 WITH RESPECT TO LOCAL

GOVERNMENTAL UNITS

Fuel Budgeting Program, Series 2017 A (Costless Collar)

Counter Party: Bank of Montreal

Number of Participants: 4

Commodity: Gasoline (RBOB)

Notational Quantity

Per Calculation

Date Period (GAL) Strike (Cap) Strike (Floor)

January 17 29,078 $ 2.0100 $ 1.6325

February 17 25,917 $ 2.0100 $ 1.6325

March 17 26,786 $ 2.0100 $ 1.6325

April 17 25,214 $ 2.0100 $ 1.6325

May 17 24,987 $ 2.0100 $ 1.6325

June 17 26,386 $ 2.0100 $ 1.6325

July 17 28,620 $ 2.0100 $ 1.6325

August 17 27,836 $ 2.0100 $ 1.6325

September 17 25,666 $ 2.0100 $ 1.6325

October 17 26,046 $ 2.0100 $ 1.6325

November 17 20,859 $ 2.0100 $ 1.6325

December 17 22,907 $ 2.0100 $ 1.6325

Total (GAL) 310,302

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Commodity: Diesel (ULSD)

Notational Quantity

Per Calculation


January 17 88,030 $ 2.0150 $ 1.6375

February 17 100,882 $ 2.0150 $ 1.6375

March 17 80,807 $ 2.0150 $ 1.6375

April 17 79,883 $ 2.0150 $ 1.6375

May 17 84,313 $ 2.0150 $ 1.6375

June 17 46,384 $ 2.0150 $ 1.6375

July 17 26,151 $ 2.0150 $ 1.6375

August 17 84,165 $ 2.0150 $ 1.6375

September 17 86,950 $ 2.0150 $ 1.6375

October 17 72,705 $ 2.0150 $ 1.6375

November 17 83,300 $ 2.0150 $ 1.6375

December 17 78,492 $ 2.0150 $ 1.6375

Total (GAL) 912,062

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Notational Quantity

Per Calculation


January 16 25,189 $ 1.6225 $ 1.3160

February 16 25,495 $ 1.6225 $ 1.3160

March 16 24,198 $ 1.6225 $ 1.3160

April 16 24,649 $ 1.6225 $ 1.3160

May 16 24,896 $ 1.6225 $ 1.3160

June 16 26,803 $ 1.6225 $ 1.3160

July 16 23,650 $ 1.6225 $ 1.3160

August 16 27,750 $ 1.6225 $ 1.3160

September 16 22,542 $ 1.6225 $ 1.3160

October 16 26,883 $ 1.6225 $ 1.3160

November 16 22,033 $ 1.6225 $ 1.3160

December 16 23,873 $ 1.6225 $ 1.3160

Total (GAL) 297,961

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Notational Quantity

Per Calculation


January 17 65,311 $ 1.4950 $ 1.1900

February 17 82,006 $ 1.4950 $ 1.1900

March 17 64,391 $ 1.4950 $ 1.1900

April 17 70,192 $ 1.4950 $ 1.1900

May 17 69,873 $ 1.4950 $ 1.1900

June 17 36,595 $ 1.4950 $ 1.1900

July 17 19,355 $ 1.4950 $ 1.1900

August 17 59,049 $ 1.4950 $ 1.1900

September 17 73,042 $ 1.4950 $ 1.1900

October 17 56,270 $ 1.4950 $ 1.1900

November 17 64,002 $ 1.4950 $ 1.1900

December 17 77,589 $ 1.4950 $ 1.1900

Total (GAL) 737,675

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Notational Quantity

Per Calculation


January 15 36,405 $ 2.0752 $ 1.5605

February 15 36,970 $ 2.0752 $ 1.5605

March 15 37,154 $ 2.0752 $ 1.5605

April 15 37,846 $ 2.0752 $ 1.5605

May 15 36,815 $ 2.0752 $ 1.5605

June 15 38,337 $ 2.0752 $ 1.5605

July 15 37,638 $ 2.0752 $ 1.5605

August 15 39,410 $ 2.0752 $ 1.5605

September 15 35,364 $ 2.0752 $ 1.5605

October 15 40,334 $ 2.0752 $ 1.5605

November 15 35,775 $ 2.0752 $ 1.5605

December 15 36,512 $ 2.0752 $ 1.5605

Total (GAL) 448,560

10





Notational Quantity

Per Calculation


January 15 70,374 $ 2.3180 $ 1.7901

February 15 85,255 $ 2.3180 $ 1.7901

March 15 73,819 $ 2.3180 $ 1.7901

April 15 65,000 $ 2.3180 $ 1.7901

May 15 77,661 $ 2.3180 $ 1.7901

June 15 40,534 $ 2.3180 $ 1.7901

July 15 28,034 $ 2.3180 $ 1.7901

August 15 63,539 $ 2.3180 $ 1.7901

September 15 76,049 $ 2.3180 $ 1.7901

October 15 65,177 $ 2.3180 $ 1.7901

November 15 78,228 $ 2.3180 $ 1.7901

December 15 75,468 $ 2.3180 $ 1.7901

Total (GAL) 799,138

11

Fuel Budgeting Program, Series 2016 B (Cap Only)




Notational Quantity

Per Calculation

Date Period (GAL) Strike (Cap)

January 16 23,146 $ 1.6340

February 16 28,393 $ 1.6340

March 16 26,513 $ 1.6340

April 16 30,282 $ 1.6340

May 16 29,427 $ 1.6340

June 16 32,938 $ 1.6340

July 16 52,102 $ 1.6340

August 16 53,316 $ 1.6340

September 16 53,321 $ 1.6340

October 16 49,967 $ 1.6340

November 16 60,069 $ 1.6340

December 16 68,048 $ 1.6340

January 17 64,646 $ 1.6340

February 17 73,493 $ 1.6340

March 17 73,013 $ 1.6340

April 17 76,282 $ 1.6340

May 17 73,927 $ 1.6340

June 17 91,038 $ 1.6340

Total (GAL) 959,921

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Notational Quantity

Per Calculation


January 16 11,161 $ 1.6228

February 16 10,492 $ 1.6228

March 16 12,696 $ 1.6228

April 16 10,199 $ 1.6228

May 16 8,331 $ 1.6228

June 16 10,421 $ 1.6228

July 16 39,293 $ 1.6228

August 16 48,221 $ 1.6228

September 16 43,486 $ 1.6228

October 16 40,307 $ 1.6228

November 16 47,269 $ 1.6228

December 16 151,758 $ 1.6228

January 17 402,161 $ 1.6228

February 17 373,592 $ 1.6228

March 17 163,696 $ 1.6228

April 17 89,199 $ 1.6228

May 17 98,731 $ 1.6228

June 17 118,421 $ 1.6228

Total (GAL) 1,679,434

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Notational Quantity

Per Calculation


July 15 43,000 2.1630

August 15 43,000 2.1630

September 15 33,000 2.1630

October 15 32,000 2.1630

November 15 25,000 2.1630

December 15 20,000 2.1630

January 16 20,000 2.1630

February 16 20,000 2.1630

March 16 22,000 2.1630

April 16 32,000 2.1630

May 16 29,000 2.1630

June 16 35,000 2.1630

Total (GAL) 354,000

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Notational Quantity

Per Calculation


July 15 57,000 $ 2.2450

August 15 76,000 $ 2.2450

September 15 65,000 $ 2.2450

October 15 56,000 $ 2.2450

November 15 70,000 $ 2.2450

December 15 237,000 $ 2.2450

January 16 352,000 $ 2.2450

February 16 320,000 $ 2.2450

March 16 124,000 $ 2.2450

April 16 51,000 $ 2.2450

May 16 62,000 $ 2.2450

June 16 75,000 $ 2.2450

Total (GAL) 1,545,000

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ATTACHMENT B

BANK OF MONTREAL COMMODITY SWAP AGREEMENT

16

ATTACHMENT C

CARGILL, INCORPORATED COMMODITY SWAP AGREEMENT

Documents

INDIANA BOND BANK RFI FOR QUALIFIED INDEPENDENT … · 2017-08-14 · (3) the entity adopts the legal documents to participate in the Program; (4) the entity elects the notional amount