Michael C. Brunsman
Senior Vice President
Energy Services
Global Leasing
312 Walnut Street, Suite 2200
Cincinnati, OH 45202
T 513-929-5102 M 513-484-0049
[email protected]
October 30, 2024
VIA ELECTRONIC MAIL
City of Salinas
200 Lincoln Avenue
Salinas, CA 93901
Cc: Craig Hill, Christian Sprunger, & Matt DeFilippis, NHA Advisors Vince Lazalde & Julius Rees, Stifel
Brad Koster & Tina Wilson, BofA Global Leasing – Energy Services
Re: City of Salinas, approximately $4,741,000 total project cost, Non-Bank Qualified Tax-Exempt Equipment Financing, Annual Appropriations Structure
Banc of America Public Capital Corp and its affiliates (“BAPCC") is pleased to submit to City of Salinas (the “City”) the Non-Bank Qualified Tax-Exempt Financing proposal (the Proposed Transaction”) as described in the attached Summary of Terms and Conditions (the "Term Sheet"). Please review the Term Sheet and contact me if you have any questions.
This letter and the Term Sheet (collectively, the “ Proposal” or the “ Proposal Letter”) include only a brief description of the principal terms of the Pr oposed Transaction, and are intended for discussion purposes only. Please understand that this Proposal is not a commitment or offer to purchase, and does not create any obligation for BAPCC. BAPCC will not be responsible or liable for any damages, consequential or otherwise, that may be incurred or alleged by any person or entity as a result of this Proposal Letter. BAPCC will notify you in writing of its decision to proceed with the Proposed Transaction after completing its review and analysis.
This Proposa l must be accepted on or before November 8 , 2024 in order for the BAPCC to proceed with its consideration of the Proposed Transaction. To accept this Proposal, please sign the enclosed copy of this Proposal Letter and return it to my attention at the following email address:
[email protected].
Thank you for allowing us the opportunity to prepare this Proposal for City of Salinas.
Sincerely yours,
Banc of America Public Capital Corp
Michael C. Brunsman
By: Michael C. Brunsman
Title: Senior Vice President
The undersigned, by its authorized representative below, accepts the Proposal contingent upon proper approval at a meeting of its Governing Board. The undersigned agrees to furnish BAPCC , its successors and assigns, any information relating to the business or financial condition of the City or its affiliates, and authorizes the BAPCC, Bank of America, N.A. and their affiliates to disclose to, discuss with and distribute such information ( and any information they may already have) to any other affiliates or proposed assignees or successors of BAPCC.
City of Salinas
By: _____
Title: _____
Date: _____
“Bank of America” is the marketing name used by certain Global Banking and Global Markets businesses of Bank of America Corporation. Lending, leasing, equipment finance and other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Banc of America Public Capital Corp, a wholly-owned subsidiary of Bank of America, National Association, is not a municipal advisor and is not subject to the fiduciary duty established in Section 15B(c)(1) of the Securities Exchange Act of 1934, as amended, with respect to any municipal financial product or issuance of municipal securities. The information provided in this document is not intended to be and should not be construed as “advice” within the meaning of Section 15B of the Securities Exchange Act of 1934 and the municipal advisor rules of the SEC. © 2022 Bank of America Corporation. All rights reserved.
City of Salinas
200 Lincoln Avenue
Salinas, CA 93901
Cc: Craig Hill, Christian Sprunger, & Matt DeFilippis, NHA Advisors Vince Lazalde & Julius Rees, Stifel
Brad Koster & Tina Wilson, BofA Global Leasing – Energy Services
RE: City of Salinas Financing Proposal
Banc of America Public Capital Corp is pleased to submit the following financing proposal for the City of Salinas solar and backup generation project with Engie. No municipal financial products or municipal securities have been included in the following proposal.
I. Lessee City of Salinas
II. Lessor Information
Lessor Name: Banc of America Public Capital Corp (“BAPCC”) Address: 312 Walnut Street, Suite 2200
Cincinnati, OH 45202
Contact: Michael Brunsman
Telephone: 513-929-5102
Email: [email protected]
Background: BAPCC offers unique financing features and qualifications that can be leveraged on behalf of the City to complete this private placement transaction at a low interest cost and in a smooth and efficient manner. These features and qualifications include:
1. Taxable & Tax-Exempt Private Placement Experience: BAPCC is a leading provider of private placement capital to the state government, municipal local government, K -12, housing authority, and higher education tax -exempt markets. Our teams are highly experienced in documenti ng and closing tax -exempt and taxable private placement transactions in California, such as the subject of this bid.
2. Energy Services Focus: BAPCC’s Energy Services group is a leading provider of financial solutions for energy efficiency, renewable energy, and energy generation equipment and assets; and as such we have experience in working with energy services companies. Bank of America is committed to improving the environment and has increased its current Environmental Business Initiative to $1 tril lion. Since 2007, the Bank’s Environmental Business Initiative has deployed more than $158 billion in financing to low-carbon and sustainable business activities across the globe.
3. Financial Strength: Information regarding Bank of America’s financial condition can be found in the Annual Report on our website, www.bankofamerica.com.
III. Lease Structure
Purpose Finance the solar and backup generation project designed and installed by Engie under a performance contract with City of Salinas (the “City” or “Lessee”).
Structure This transaction will be structured as a Non -Bank Qualified Tax -Exempt Equipment Lease/Purchase Agreement (the “Agreement”) between the Lessee and the Lessor.
The obligation to make Rental Payments under the Agreement shall be an annual appropriation obligation of the Lessee payable from any lawfully available funds.
Regardless of the status of installation or performance of the Equipment, the Lessee’s obligation to make payments commence on that certain date as set forth in the Agreement. Legal title to the Equipment shall be vested in the Lessee. The Agreement will be a net financial contract of the Lessee, and all expenses (including, but not limited to, insurance, maintenance, and taxes) will be for the account of the Lessee.
Security Lessor’s s ecurity interest in the Equipment will be evidenced by filing a UCC -1 Financing Statement (Personal Property) with respect to Equipment. Prior to closing, Lessee will be required to provide legal descriptions (as applicable) for the property locations at which the Equipment will be installed in order to enable the Lessor to record fixture filings in the appropriate recording offices.
Proceeds Approximately $4,741,000
Term 20 years
Payments Payments similar to those shown on the attached amortization schedule.
Prepayment Beginning with the first payment date in payment year 3 and on each paym ent date through payment year 10, City will have the option to prepay its obligations under the Agreement in whole only with a prepayment premium of 102% of the outstanding principal balance.
Beginning with the first payment date in payment year 11 and on each payment date through maturity, City will have the option to prepay its obligations under the Agreement in whole only with a prepayment premium of 10 1% of the outstanding principal balance.
One-Time
Extraordinary
Partial
Prepayment
City anticipates an IRA tax credit and/or other grant proceeds amounting to up to approximately $1.03 million that if received the City would like the option to use for a one-time partial prepayment of the Agreement. At any time within three years from the Commencement Date, Lessor will allow this one-time partial prepayment with a prepayment premium of 100.5%.
Termination The financing will be subject to annual appropriations (see Structure section above).
Interest Rate 20 years) 4.255%, locked through December 31, 2024
The calculation for the Interest Rate for each option above is:
20-year option)
14-Year SOFR SWAP Rate* X 79% + Applicable Spread Below:
Average Schedule Indicative
Life Swap Index Interest
Term Rate* x 79% Spread Rate
14 3.88% 3.07% 1.190% 4.255%
*Rates as of October 30, 2024 on Refinitiv page USDSROIS=
Index Succession: In the event the SOFR swap index ceases (a) to be determined and made available through the applicable Refinitiv screen page (or comparable source selected by Lessor), (b) to be a representative index for approximating movements in Lessor’s costs of funding fixed-rate transactions, or (c) to be the generally accepted swap index in the marketplace, Lessor may in its discretion use another replacement swap index applicable to U.S. Dollar collateralized funding that is generally accepted in the commercial credit marketplace as a comparable substitute for the index.
Rate Expiry If this Proposal is signed and returned to Lessor on or prior to November 8, 2024, Lessor will hold the Interest Rate through December 31, 2024.
If closing of the transaction occurs after such rate lock expiration, the respective Interest Rate for the transaction is subject to repricing at the discretion of Lessor seven (7) business days prior to the scheduled closing date in accordance with the selected option formula above. In no event will the respective SOFR SWAP Rate(s) used to reset the Interest Rate be less than the SOFR SWAP Rate(s) in the pricing grid above.
IF LESSEE ASKS LESSOR TO LOCK THE RESPECTIVE INTEREST RATE ABOVE FOR
FUNDING, LESSEE AGREES NOT TO SEEK FUNDING FOR THE PROJECT WITH
ANOTHER LENDER FOR A PERIOD OF SIX MONTHS AS A MEANS TO CIRCUMVENT THE RATE THAT LESSEE HAS ASKED LESSOR TO HOLD.
PLEASE NOTE THAT THE PRICING AND INTEREST RATE ABOVE ARE BASED ON THE AVERAGE LIFE OF THE ATTACHED DRAFT AMORTIZATION SCHEDULES. TO
THE EXTEXT THAT THE AVERAGE LIFE OF THE FINAL SELECTED AMORTIZATION
SCHEDULE CHANGES FROM THE ATTACHED, THE RESPECTIVE INTEREST RATE
ABOVE IS SUBJECT TO MODIFCATION BY LESSOR TO ACCOUNT FOR ANY LENGTHENING OF THE AVERAGE LIFE OF THE FINAL SCHEDULE.
Closing Costs Lessor does not charge any closing costs or fees. The Lessee will be responsible for paying its costs, including delivery of a validity and tax opinion from the Lessee’s Bond Counsel and any CDIAC Reporting Fee.
Escrow Account
Terms
At closing, proceeds from the Agreement will be deposited into an Escrow Account established pursuant to an Escrow and Account Control Agreement (the “Escrow”) by and among the City, the Lessor and the Escrow Agent. The Escrow Agent will be selected by the City, subject to the Lessor’s approval. The Lessor has an arrangement with Wilmington Trust, under which escrow agen t services for these types of transactions are provided at no charge to City. During the installation period, the City will requisition funds in the manner outlined in the Escrow. No funds will be disbursed without the written approval of the City and approval of the Lessor. The City will direct the investments in the Escrow Account and all interest earnings will accrue to the City’s benefit.
Documents Documents shall be prepared by the Lessor’s Counsel and will include all documents, certificates and opinions as are reasonably necessary to evidence and carry out the transaction. All documents must be acceptable to all parties.
Payment &
Performance
Bonds
The Lessor requires to be listed as dual obligee on the payment and performance bonds provided by Engie. No draws from Escrow will be permitted until such bonds are in place.
Credit Approval
This proposal is an indication of interest in the transaction, and not a commitment to provide financing by the Lessor. Consummation of this transaction is subject to credit approval by the Lessor and execution and delivery of documentation acceptable to all parties. All fundings are subject to no material adverse change in the financial condition of the City from the time of credit approval.
Closing Date On or before December 31, 2024. Sample amortization utilizes a closing date of December 5, 2024.
Assignment The Lessor shall be entitled to assign its right, title and interest or any part thereof in the Agreement and Equipment, on a private placement basis to qualified purchasers. In addition, the Lessor shall be entitled to assign its right, title and interest or any part thereof in the Agreement to a trustee for the purpose of issuing certificates of participation or other forms of certificates evidencing an undivided interest in such Agreement, provided such certificates are sold only on a private placement basis (and not pursuant to any “public offering”) to a purchaser(s) who represent that (I) such purchaser has sufficient knowledge and experience in financial and business matters to be able to evaluate the risks and merits of the investment (ii) such purchaser understands neither the Agreement or certificates will be registered under the Securities Act of 1933, (iii) such purchaser is either an “accredited investor” within the meaning of Regulation D under the Securities Act of 1933, or a qualified institu tional buyer within the meaning of Rule 144A, and (iv) that it is the intention of such purchaser to acquire such certificates (A) for investment for its own account or (B) for resale in a transaction exempt from registration under the Securities Act of 19 33. At any time, the Lessor may sell, assign or encumber all or any part of its right title and interest in the Agreement; however, in no event shall the Lessor assign this Agreement as a public offer of participation. The City consents to a private placement transaction within the meaning of applicable federal securities laws.
City’s
Responsibilities
All responsibilities imposed by the ownership or possession of the Equipment including, but not limited to, taxes, insurance and equipment maintenance, shall be borne by the City.
USA Patriot Act
Compliance
All financial institutions are required by Federal Law to obtain, verify and record information that identifies each customer who opens an account with us. When you open an account with us, we will ask you for your name, address and other information that will allow us to identify you, such as documents evidencing legal status and formation, taxpayer identification number and date of birth (if applicable).
Market
Disruption
Notwithstanding anything contained herein to the contrary, in the event any material change shall occur in the financial markets after the date of this Proposal Letter, including but not limited to any governmental action or other event which materially adversely affects the extension of credit by banks, leasing companies or other lending institutions, the Lessor may modify the indicative pricing described above.
III. Other Information
Capitalized terms used but not defined herein shall have the meani ng given such terms in the transaction documents (i.e. the Agreement, Facility Lease, Site Lease, the Escrow).
This proposal letter and the Term Sheet include only a brief description of the principal terms of the Proposed Transaction and do not purport t o summarize all of the conditions, covenants, representations, warranties and other provisions that would be contained in definitive documentation for the transaction contemplated hereby. The Lessor will not be responsible or liable for any damages, consequential or otherwise, that may be incurred or alleged by any person or entity, including the City or Engie as a result of this Proposal Letter.
Thank you for the opportunity to provide this proposal. If you have any questions or would like to discuss this proposal in further detail, please let us know.
Sincerely yours,
Banc of America Public Capital Corp
Michael C. Brunsman
By: Michael C. Brunsman
Title: Senior Vice President
STANDARD DISCLOSURES AND DISCLAIMERS
The transaction described in this document is an arm’s length, commercial transaction between you and Banc of America Public Capital Corp ( “BAPCC”) in which: (i) BAP CC is acting solely as a principal ( i.e., as a lender or assignee) and for its own interest; (ii) BAPCC is not acting as a municipal advisor or financial advisor to you; (iii) BAPCC has no fiducia ry duty pursuant to Section 15B of the Securities Exchange A ct of 1934 to you with respect to this transaction and the discussions, undertakings and procedures leading thereto (irrespective of whether BAPCC or any of its affiliates has provided other services or is currently providing other services to you on other matters); (iv) the only obligations BAPCC has to you with respect to this transaction are set forth in the definitive transaction agreements between us; and (v) BAPCC is not recommending that you take an action with respect to the transaction described in this document, and before taking any action with respect to the this transaction, you should discuss the information contained herein with your own legal, accounting, tax, financial and other advisors, as you deem appropriate. If you would like a municip al advisor in this transaction that has legal fiduciary duties to you, you are free to engage a municipal advisor to serve in that capacity.
STATEMENT FOR PROPOSALS SUBMITTED UNDER RFPS
This proposal is submitted in response to your Request for Proposal. The contents of this proposal and any subsequent discussions between us, including any and all information, recommendations, opinions, indicative pricing, quotations and analysis with respect to any municipal financial product or issuance of municipal securities, are provided to you in reliance upon the exemption provided for responses to requests for proposals or qualifications under the municipal advisor rules (the “Rules”) of the Securities and Exchange Commission (240 CFR 15Ba1-1 et seq.).
The Staff of the SEC’s Office of Municipal Securities has issued guidance which provides that, in order for a request for proposals to be consistent with this exemption, it must (a) identify a particular objective, (b) be open for not more than a reasonable period of time (up to six months being generally considered as reasonable), and (c) involve a competitive process (such as by being provided to at least three reasonably competitive market participants) or by being publicly posted to your official website. In submitting this proposal, we have relied upon your compliance with this guidance.
In submitting this proposal, we are not undertaking to act as a “municipal advisor” to you or any other person within the meaning of the Rules. In connection with this proposal and the transactions described herein, we are not subject to, and we hereby disclaim, any fiduciary duty to you or to any other person. We understand that you will consult with and rely on the advice of your own municipal, financial, tax, legal and other advisors as and to the extent you deem necessary in connection with your evaluation of this proposal and the transactions described herein.