Frequently Asked Questions

What types of Bonds does the State of Tennessee issue?

The State of Tennessee issues four types of bonds:


General Obligation Bonds: General Obligation Bonds are payable as to both principal and interest from any monies of the State from whatever source they are derived, although specified fees and taxes currently are allocated to this payment. The full faith and credit of the State is pledged to the payment of principal and interest on these bonds.


Tennessee State School Bond Authority ("TSSBA"): The Authority is authorized to issue bonds and notes to finance capital outlay projects for public higher educational institutions. These institutions include the University of Tennessee System including its branches and divisions and the Tennessee Board of Regents of the State University and Community College System. The bonds and notes are payable principally from monies made available by these institutions.


Tennessee Local Development Authority ("TLDA"): The Authority is authorized to issue bonds and notes (i) to make loans to local governments for sewage treatment and waterworks; (ii) to fund loans to certain small business concerns for pollution control equipment; (iii) to make funds available for loans for agricultural enterprises; (iv) to make loans to not-for-profit organizations providing certain mental health, mental retardation, and alcohol and drug services; (v) to make loans to local government units to finance construction of capital outlay projects for K-12 educational facilities; and (vi) to make loans to airport authorities and municipal airports. The bonds and notes are payable principally from monies made available by these institutions.


Tennessee Housing Development Agency ("THDA"): The Agency is authorized to issue its bonds and notes to make funds available for the financing of residential housing for persons and families of low and moderate income. The bonds and notes are payable principally from repayments of these loans.


What is the difference between a competitive and negotiated bond sale?

When the State uses a competitive bond sale, it advertises its bonds to the underwriting community and requests bids for the purchase of its bonds at a specified time. Underwriters submit a bid to purchase the bonds at a given dollar price. The underwriting firm that submits the highest dollar price purchases the bonds and wins the right to sell the bonds to the public. The State does not know in advance the firm that will be the successful bidder on the bonds.


When the State uses a negotiated bond sale, the State selects the underwriting team in advance of the sale, then negotiates the price of the bonds with that firm. To determine the price, the underwriting team offers the bonds to the general public including both retail investors and institutional investors. When the State sells bonds in this manner, retail purchasers generally receive the priority in ordering bonds.


Who is the senior book running manager and what are its responsibilities?

The senior book running manager is the leader of the underwriting team in a negotiated sale. The senior book running manager along with the co-managers determine the preliminary pricing of the bonds. The team submits orders to the senior book running manager. Once the pricing is completed, the senior book running manager then allocates the bonds to the other members of the underwriting team.


Who is a co-manager?

The co-manager assists in marketing and selling the debt issue, provides marketing and sales assistance to the senior manager and shares the underwriting risk.


What is the pricing date?

The day on which bonds are sold at either competitive or negotiated sale.


What is the first interest payment date?

The day on which the issuer first pays interest on the bonds. The first interest paid will be prorated according to the number of days from the dated date of the bonds.


What is the first principal payment or first maturity date?

The date on which the issuer first begins to pay or amortize principal on the debt it has incurred.


In what denominations are bonds sold?

Bonds are usually sold in a minimum denomination of $5,000 and whole multiples thereof.


What is a bond rating?

A bond rating is a measure of the credit quality and safety of a bond, based on the issuer's financial and economic condition and prospects. More specifically, it is an evaluation from an independent rating service indicating the likelihood that an issuer will be able to make scheduled interest and principal payments.


What are the current ratings on long-term bonds issued by the State of Tennessee, its Authorities and Agencies?

  Moody’s
Investor
Services
S&P Global Ratings
Fitch
General Obligation Aaa AAA AAA
TSSBA Aa1 AA+ AA+
TLDA —— AA+ AA
THDA Aa1 AA+ N.R.


What is a preliminary official statement (POS)?

A preliminary official statement (POS) is issued prior to the sale date to provide potential investors information to make an evaluation on whether or not to purchase the bonds.


What is an official statement (OS)?

An OS is the offering statement or disclosure statement for a municipal security. The OS contains relevant information about the issuer and the bond issue including the maturities, interest rates original prices of the bonds.


What is a brokerage account?

This account is established at a broker-dealer and allows you to purchase stocks, bonds, mutual funds and other investments by paying the broker-dealer to buy or sell the items that you request on your behalf.



Must I hold the bond until it matures?

No. While holding the bond until final maturity provides you, the investor, with the amount you anticipated receiving, you may sell it prior to maturity to another person or entity through the broker-dealer. Should you decide to do this, the sale will be based on the market price for the bond at that time, and you may not receive the entire principal amount that you paid for the bond should interest rates have risen during the period that you owned it. In addition, the price may be affected by other factors, such as a change in the credit quality of the issuer.


What is the difference between buying a bond in the primary market and the secondary market?

Throughout the year an investor has many opportunities to purchase Tennessee bonds. Obviously, investors can purchase bonds during the original offering period. This purchasing opportunity is know as purchasing in the primary market.


However, Tennessee bonds also trade from time to time in the secondary market as well. Here is an example. Investor A purchases, during the primary offering, a bond that matures in ten years. Seven years later, Investor A sells that bond through his or her broker-dealer. The bond has a three-year remaining life. Investor B is notified that there is now a bond with a three-year maturity available for purchase in the secondary market. A three-year bond meets Investor B's maturity need. Investor B can purchase that bond in the secondary market from a broker dealer.


How can I obtain a copy of an Official Statement or other State disclosure information for a particular bond issue?

Copies of the most recent Official Statement may be obtained from the Office of State and Local Finance’s website at http://www.comptroller.tn.gov/sl/   or by calling the office at (615) 401-7872.

In accordance with the requirements of Rule 15c2-12 promulgated by the Securities and Exchange Commission (“SEC”), the State has also agreed to provide to the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access (“EMMA”), annually, financial statements and certain other financial information and operating data, as well as notice of certain specified events should they occur. Documents filed with EMMA may be downloaded free of charge from http://emma.msrb.org.


I own a State of Tennessee bond, and I have a question concerning:
  • an interest or principal payment
  • any notices that may have been issued to call the bonds prior to maturity
  • a lost bond
  • the registration of a bond that has matured.

For information regarding general obligation bonds and bonds issued by the Tennessee Local Development Authority, please call the Office of State and Local Finance at the State of Tennessee at (615) 401-7872.


For information regarding the Tennessee State School Bond Authority bonds, please call Regions Bank at (615) 770-4358.


For information regarding the Tennessee Housing Development Agency bonds, please call U.S. Bank National Association at (615) 251-0718.

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