Connection

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Connection

  1. 1. Corporate Trust Connection Spring 2001 Working Together to Benefit You A t U.S. Bank Corporate Trust Services, we strive to simplify our customers’ capabilities. The result is that we can creatively structure financing at competitive rates lives by delivering convenient for our customers. With access to a comprehensive more than 70 investment range of financial solutions. banking professionals in 16 Our goal is to be a resource locations throughout the for and partner with our country, our investment customers. As a resource, we can tap banking team is among the largest in the nation. What’s into the expertise of a variety of areas within Corporate Structured Finance inside Trust Services, as well as the The structured finance We can tap into the entire U.S. Bank corporation, group of U.S. Bank expertise of the entire 2 Tobacco U.S. Bank corporation. Settlement in order to develop the best Corporate Trust Services has Securitization plans for your needs. A few built an impressive record for of these areas are investment providing high-quality trust ships with many different 3 Outlook for the banking, structured financ- and document custody serv- issuers and servicers who Economy ing, escrow services and ices for all types of structured have varying types of collat- government banking. transactions. Included in our eral. This may encompass a full range of support services variety of receivables and Investment Banking are trustee, registrar and pay- most recently included The investment banking ing agent, bond administra- tobacco litigation settle- area provides experienced tor/calculation agent and tax ment proceeds. professionals as well as mar- reporting agent. Our staff of ket-making and distribution specialists manages relation- …continued on page 4 INVESTMENT PRODUCTS: • NOT FDIC-INSURED • NO BANK GUARANTEE • MAY LOSE VALUE A Message About Our Merger Keeping you well informed about the Firstar acquisition of U.S. Bancorp and changes that may affect your business is a priority for us. As of the printing of this newsletter, the closing date is scheduled to occur during the first quarter of this year, pending shareholder and regulatory approvals. Shareholder meetings for both organizations were held on February 13, 2001. The dedicated employees of both organizations are striving to make the integration seamless for you. Because of this careful planning and working to develop a smooth process, you should not notice any changes on the closing date. If changes are made that may affect your business, you will be contacted well in advance. …continued on page 4
  2. 2. Tobacco Settlement Securitization A New Twist in Bond Issues L ast fall, U.S. Bank Corporate Trust Services had the distinction of being Whether your bond issues are cutting- edge or conventional, AHFC will be obligated to make up any deficiencies in revenues necessary to meet involved in a “totally new U.S. Bank Corporate debt-service requirements on type of bond issue,” accord- Trust Services stands the bonds. Since the state is ing to Tom Zrust, vice presi- ready to assist you. legally separate from the dent of U.S. Bank Corporate NTSC, its credit rating is not Trust Services. “We were at risk through the tobacco chosen to handle the bond bond issuance. trusteeship for Tobacco Settlement Asset-Backed Put Innovation Bonds issued by Alaska’s and Expertise to Northern Tobacco Work for You Securitization Corporation U.S. Bank Corporate (NTSC),” he explains. Trust Services is proud to The bonds are secured by The benefit to Alaska of • the impact of the national have provided the expertise 40% of the expected revenue securitizing a portion of its smoking prevention and necessary to put together this stream from Alaska’s portion settlement proceeds is that it public education campaign unprecedented bond issue. of the Master Settlement receives a sizable sum of U.S. Bank Corporate Trust Agreement, signed in 1998 money to use immediately, Insulating the Services serves as trustee for by the four largest U.S. ciga- rather than having to wait State of Alaska all the AHFC bond issues, so rette manufacturers. The for the smaller and variable The NTSC was set up as a it was a natural choice for revenues that Alaska will payments to come in over a subsidiary of Alaska Housing the NTSC. We look forward receive under the settlement number of years. There are Finance Corporation (AHFC) to serving your needs, too. are based on a number of risks, however. solely for the purpose of Whether your bond issues variables, including inflation If the stream of tobacco issuing the bonds on behalf are cutting-edge or conven- and domestic cigarette ship- settlement payments is of the State of Alaska. The tional, U.S. Bank Corporate ments in future years. To the reduced, stalled or halted, tobacco revenue bonds are Trust Services stands ready extent that people smoke the NTSC could have diffi- an obligation of the NTSC to assist you. fewer cigarettes, the revenues culty paying the debt service only. Neither the state nor will decline. on the bonds. Many factors have the potential to affect An Unprecedented future payments. The possi- Action bilities include: At a Glance Alaska is one of the first • one or more of the The Tobacco Master Settlement states in the nation to sell tobacco manufacturers bonds secured by revenues filing for bankruptcy Attorneys general representing 46 states, the from the tobacco settle- • a potential federal lawsuit District of Columbia and the five U.S. territories ments. Alaska Governor against tobacco companies signed an agreement in November 1998 with five Tony Knowles proposed the to recover Medicare major cigarette companies (representing 97.5% of securitization to finance con- and other federal health the tobacco industry). The Master Settlement struction and repair of rural care costs Agreement requires the manufacturers to make schools and ports. The • a possible increase in the annual payments to the states totaling about $206 Alaska legislature endorsed federal cigarette tax billion from 2000 through 2025. his proposal by passing a • possible Food and Drug The funds are allocated to the states based on a for- law that authorized the Administration regulation mula developed by the attorneys general. It makes esti- NTSC to issue bonds to of tobacco products mates of tobacco-related Medicaid expenditures and the finance $93 million worth number of smokers in each state. of projects. 2
  3. 3. Outlook for the Economy 2001 W hether the U.S. has achieved – and can sustain – an economic soft mandate for President George W. Bush. In addition, the U.S. Senate is evenly divided and Since nervous investors tend to flee to the relative stability of bonds when the landing, few argue that 2001 the House has a razor-thin stock market is down, a will exhibit the kind of Republican majority. Many depressed equities market superheated economy that analysts believe that this may could continue to help the resulted in 5.6% growth in be a good sign. Since it is bond market. However, with gross domestic product in unlikely that any major the Fed’s two rate cuts in the first half of 2000. On the spending or tax-cut bills can January, it is possible that The Fed continues to other hand, a full-scale reces- be pushed through, the econ- the stock market could monitor monetary policy sion is unlikely this year, omy could continue to move revive and the bond market in pursuit of an economic according to a substantial forward under its own steam. suffer the consequences. soft landing. number of economists. Asset-backed lending may Many believe that the econ- A Look at the increase as a result of heavier As for interest rates, the omy will continue its Markets debt loads. As the economy Fed took the unusual step of unprecedented advance, In contrast to the disap- slows, loan structures sup- taking action before the although at a considerably pointing performance of the ported by assets may seem January 30-31 board meet- slower pace.* Conservative Standard & Poor’s 500 more attractive and receive ing, dropping short-term estimates are for 2% growth index of stocks (down more covenant flexibility or rates by .5% in early in the first half of 2001, per- 10.14% for the year) and the reduced lending costs. In January, and dropped them haps increasing to 3% in the precipitous drop of the addition, the market for another .5% on January 31. second half.** Whatever Nasdaq (down 39.29%),** asset-backed loans may con- Bondtalk.com, an online happens, the factors that many areas of the bond mar- tinue to be stimulated by a economy and bond market affect the economy will no ket fared well in 2000. The more flexible definition of site, is predicting that lower doubt have considerable Lipper Indexes showed a assets. Although traditional rates will help the bond mar- impact on the debt markets. positive 11.89% return on assets include receivables, ket in the short term, but U.S. Government Bonds, inventory, equipment, real may have a negative impact Political Inertia? 10.31% on Corporate A- estate, etc., nontraditional later in the year if the The protracted presidential Rated Debt and 11.10% in assets could include intangi- decrease stimulates the election resulted in no clear General Muni Debt.** bles such as trade names stock market. and goodwill. Financing Solutions Inflation and At U.S. Bank Corporate Interest Rates Trust Services, we’ve got the Agreement As of December 2000, the expertise and experience to Consumer Price Index help you through your Four states – Mississippi, Florida, Texas and increased at an annual rate financing issues in any Minnesota – signed separate agreements with the of 3.4%.*** The consensus economic and market tobacco companies prior to the Master among economists surveyed conditions. Contact your Settlement Agreement. Those settlements total by The Wall Street Journal U.S. Bank Corporate Trust more than $40 billion over 25 years. calls for milder inflation in Services Representative or The Master Settlement Agreement also 2001, and lower inflation visit our Web site at imposes restrictions on tobacco advertising and generally bodes well for the usbank.com/corporatetrust marketing and creates a trust fund, which the bond market. However, the for information on the prod- cigarette companies pay into, to compensate tobacco farm- nation’s inventory of natural ucts and services we offer. ers and quota holders for anticipated financial losses gas is at a record low,** and * Source: Time, December 18, 2000. resulting from the settlement. rising energy prices could ** Source: The Wall Street Journal, January 2, 2001. stimulate inflation. *** Source: Bureau of Labor Statistics, www.bls.gov. 3
  4. 4. Benefiting You… continued from page 1 Merger... continued from page 1 Escrow Services and capital financing needs. When you need a neutral We work closely with bond U.S. Bank remains dedicated to third party to act as a tem- counsel to develop borrow- the corporate trust business as porary agent in financial ing structures that assure demonstrated through our contin- transactions, choose our our clients the lowest costs. ued growth in traditional products escrow services group. Another area we use to and services and our expansion Escrow is an easy and help our government clients into new offerings. accepted means for assuring is our tax-exempt invest- Most importantly, the employ- the safe, fair and efficient ment banking services. We ees of Firstar and U.S. Bank completion of a variety of Government led the nation in the num- remain strongly committed to transactions. Our agents can Banking ber of senior-managed providing you with the financial hold assets, invest funds, Our relationship team municipal bond issues in solutions and service to meet your oversee distribution of funds offers a range of deposit, 1999. This underwriting needs. If you have any questions and handle tax reporting in treasury management and prominence allows us to at all, please feel free to contact order to meet the conditions account services specially offer our clients many your Relationship Specialist or of an escrow agreement. We designed for our govern- securities not available at other Corporate Trust Services specialize in several types of ment agency customers’ other firms. representative. escrow, including class needs. We can act as an Highlights of the combined action, litigation or struc- investment bank or a com- We Can Meet organization: tured settlements, govern- mercial bank, offering a full Your Needs • 27 offices nationwide, one in ment or environmental product line of financial Visit with your Argentina protection and other busi- services. We are a leader U.S. Bank Corporate Trust • Stock transfer services and ness escrow needs. These in electronic payment Services representative to escrow services available to all services can include docu- alternatives. discuss any of your banking U.S. Bank customers ment review, wire transfer Also, U.S. Bank offers needs. Our network allows • Providing services to more than and deposit and detailed comprehensive credit for our areas to work together 1 million bondholders and activity and asset reporting our government customers, for your organization’s 550,000 shareholders for all parties. specializing in cash flow benefit and growth. • Ranked the number one 4 municipal trustee in the nation The articles and information included in this newsletter are for your information and are not intended as legal, accounting or tax advice. While the information is intended to be accurate, neither U.S. Bank Corporate Trust Services nor the publisher accepts responsibility for relying on the information provided. ©2001 U.S. Bank Corporate Trust Services. Member FDIC. Comments and suggestions for the newsletter are welcome and should be forwarded to Kathleen Engesser, Marketing Manager, U.S. Bank Corporate Trust Services, (651) 244-8440 (phone) or kathleen.engesser@usbank.com (e-mail). St. Paul, MN 55101 MS SPFT0355 180 East Fifth Street Permit No. 100 Minneapolis, MN Paid U.S. Postage First-Class Mail Presorted

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