Eric Fruits co-authored an article for the Municipal Finance Journal on the costs of issuing municipal bonds.
A municipal bond issuer has a choice in how its debt is issued. With negotiated issuance, one or more underwriting firms acting together purchase the bonds from the issuer. The issuer and the underwriter negotiate many of the terms of the issuance. With competitive issuance, bidders buy all the bonds according to take-it-or-leave-it terms proposed by the issuer in a widely circulated prospectus.
Some observers believe they have seen systematic differences in the costs to the issuer under the two methods. These perceived differences have, in turn, led to research to evaluate whether–or under what conditions–one method is superior to another.
Our research indicates a strong tendency for issuers to select the method of issuance that best suits the nature of the issue at hand, such that policies to mandate one type of issuance over the other will likely increase, rather than decrease, issuance costs.
Citation:
Fruits, E., Pozdena, R., Booth, J., and Smith, R. (2008). A comprehensive evaluation of the comparative cost of negotiated and competitive methods of municipal bond issuance. Municipal Finance Journal, 28(4):15-41.
Eric Fruits provided testimony to the International Criminal Tribunal for the former Yugoslavia (ICTY) regarding the statistical reliability of estimated relationships between the deaths and migration of Kosovo Albanians and the activities of NATO and the Kosovo Liberation Army (KLA). Dr. Fruits also provided testimony regarding the statistical reliability of conclusions that Serb and Yugoslav forces were involved in a systematic campaign of murder and deportation of Kosovo Albanians.