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r disclosure to issuers <br />The SFX' ami Us Municipal Secuiilies Rule Milking Board (MSRBi rules try to protect investois (except <br />sophisticated investors) from bond ilealers. and uiulersMiters from one another But fevs rules pioiect <br />issuers nf boiuls. espectiilly in negotiated sales Nothing requires disclosuie of undeiwriters assi>ciations <br />with investors (their other clientsi who seek securities at the highest possible interest rale Without a <br />public sale, issuers have no way of detennining if tui interest late quoteil is the lowest possible in the <br />market place <br />junk bonds <br />Reportedly, devalued or defaulted junk bomis have resulted in great losses to individtial investors and <br />fimuicial institutions Wl at are junk bonds and how ilo they affect local governments'^ Are uniated <br />tax-exempts considered ’junk’"’ <br />Junk bonds are cprporsitc bonds issued to fund leveraged buyouts (LBOs). are not rated or are rated less <br />than investment grade by rating agencies Tire issuer may ex^rect the debt to be long temi but, more than <br />likely, expects to pay them off from the proceeds of a ’break up ” of the business When such sales do not <br />come off a corporation becomes saddled with huge debt which it may be unable to service. <br />Municipal bonds are not the same and. in fact, mjuiy unrated bonds are of gooil investment quality and <br />attract very strong buying interest. A lack of a rating may be because of the sire of an issue or because the <br />issuer was advised not to seek a rating and pay the rating fees Such bonds are never based on a ’’breakup" <br />of the issuer. While not junk, they often do carry higher interest rales. <br />CONTINGENT COMPENSATION <br />Perhaps issuers, such as WPPSS. are themselves victims of non disclosure in that underwriters, designers <br />and advisors often stand to be paid only if bonds are issued They are thus motivated to "get the job done" <br />whether or not it makes economic sence for the issuer. Allegedly the bad WPPSS bonds were sold well <br />after the cost and feasibility of the projects were in doubt. <br />For some projects someone should l'*e on boiud who will be compensated adequately whether or not a <br />project is financed Some projects should not be financed even if their bonds are salable, and borrowers <br />need someone in a fudiciary capacity to advise them. <br />We wish you another successful solai orbit and looking forward to seeing you at the viuious conventions <br />and meetings <br />Sincerely, <br />EHLERS AND ASSOC IaTES. INC <br />Roheit L Elilei ^