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To keep it simple RBC made it a 4 percent bond sold to yield 4 percent — making these the only bonds in the tax-exempt portion of the deal to have the interest rate precisely match the yield, and thus sell at 100 cents on the dollar.
Hoeppner also suggested making the people’s bonds more affordable for everyday fans by dropping the usual $5,000 minimum denomination down to $1,000. Hoeppner said he can’t think of the last time a bond was issued in minimum denominations of $1,000.
“We loved it,” said Commissioner of Minnesota Management and Budget Jim Schowalter. “It was part of the reason that RBC won a really competitive process” for picking the lead underwriter on the bond issue.
After a delay of game due to litigation, the deal sold well in January. Recognizing that Vikings fans live in the Dakotas and Iowa, too, RBC made them available to non-Minnesotans.
Hoeppner said 159 certificates of ownership are to go out this week, representing about $3.25 million of the $7.5 million available of the 4 percent, June 2033 maturity. Hoeppner said the largest personal certificate order was for $200,000. “I see a couple of 20s on the list,” he added, “and lots of ones and fives.”
John Taft, the CEO of RBC Wealth Management in the United States, said the first criterion in picking an underwriter for any deal is the capability to get the bonds efficiently sold, “and there isn’t anything local about that.” RBC and Piper Jaffray have that capability, but so does JPMorgan.
Another factor is the ability to sell a lot of bonds to local individual investors, in whose accounts they will likely stay until they mature. That can improve stability and liquidity in the market for any issuer’s bonds.
That’s the reason to work with locals, Taft said. While RBC may be part of a global bank based in Canada, its U.S. wealth management group headquarters and lots of clients are in Minnesota. It was Minnesotans sitting down with Minnesotans describing how they planned to sell bonds to Minnesotans — and the odd Vikings fan in Iowa.
“I’m not sure People’s Bonds will work for everything,” Taft dryly observed.
You mean there wouldn’t be a certificate for bonds financing a new municipal solid waste facility?
“If you want a certificate of ownership for a solid waste facility bond,” Taft responded, “I’m happy to get you one.”
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