Distressed Entities and Workouts
Hawkins Delafield & Wood LLP is proud to bring our nationally recognized tradition for excellence to bear on complex and distressed situations. The Firm earned its initial reputation with a previous generation of Hawkins partners in numerous situations arising during the national depression in the 1930's. More recently, the Firm enhanced its reputation in public finance with its participation in addressing New York City's fiscal crisis in 1975.
Hawkins, Delafield & Wood has consistently been called upon for advice in complex and demanding situations where continued market access of municipalities is in jeopardy. In 1975, the firm was engaged by the New York Governor’s Advisory Panel to help draft legislation creating an oversight and funding mechanism for the City. The resulting legislation created the Municipal Assistance Corporation For The City of New York (“MAC”) and diverted revenues derived from certain sales and compensating use taxes from the City to the State in order to secure the MAC bonds. The difficult state constitutional issues inherent in the MAC structure were challenged in a lawsuit filed after the sale but prior to the closing of the first MAC bond offering, which was also the first ever billion dollar municipal offering. This firm, as bond counsel, delivered an opinion to the effect that the lawsuit was without merit, which permitted the underwriters to accept delivery of the bonds. The lawsuit was ultimately resolved in MAC’s favor by the New York State Court of Appeals consistent with the opinion of Hawkins, Delafield and Wood, allowing almost nine billion dollars of MAC bonds to be issued during subsequent years. Also in the 1970’s, the Special Finance and Budget Act which we drafted for Yonkers precluded that City from filing for bankruptcy while enabling it because of budget safeguards and State Comptroller’s oversight to issue its own general obligation bonds to fund its accumulated deficit; for the City of Buffalo, legislation, drafted by us, provided special reserve fund requirements, which allowed that City to regain access to the bond market despite recurring budget imbalances.
Our work with public bankruptcy and restructuring over the years has led to the implementation by the States of New York, New Jersey and Connecticut of constitutional and statutory budgetary, fiscal and public debt issuance procedures that have served as models for states across the country. Such experience and expertise have remained current as Hawkins continues to be one of the firms that public entities call in times of fiscal distress.
City of Troy, New York
Hawkins Delafield & Wood LLP has served as Bond Counsel to the Municipal Assistance Corporation for the City of Troy, New York ("Troy MAC") since its inception in 1995. Troy MAC was established by state legislation in reaction to the deteriorating financial condition of the City of Troy, to provide a state public benefit corporation to refinance Troy’s debt, and to restore investor confidence in Troy’s obligations.
In its role as Bond Counsel, the Firm worked together with various New York State officials in developing new legislation, drafting the Troy MAC General Bond Resolution and structuring the security for Troy MAC obligations. The Firm acted as Bond Counsel for several Troy MAC bond anticipation note issues which enabled the City to meet its short-term cash flow requirements and debt service on maturing obligations.
Nassau County (New York) Interim Financing Authority
Hawkins was retained in 2000 by the State Division of the Budget to help draft special State legislation creating an oversight and funding mechanism for Nassau County, which was under severe financial distress. The resulting legislation created the Nassau County Interim Financing Authority (“NIFA”), which has issued bonds in excess of $436,200,000 in order to restructure Nassau County debt, provide budgetary relief, and finance the County’s ongoing capital project needs during its current fiscal crisis. Hawkins has been engaged as either bond counsel or underwriters’ counsel with respect to several of NIFA’s bond and note issues to date. Both the Troy and Nassau County assignments drew on the cumulative expertise and experience of partners in assisting such States as Connecticut (Bridgeport, Waterbury and West Haven) and New York to create oversight boards and structured financings during periods of economic downturns thereby staving off the resort to municipal bankruptcy.
Erie County Industrial Development Agency on behalf of City School District of Buffalo
In 2002, the City of Buffalo was enduring the worst fiscal crisis in its history, approaching its constitutional debt limit, and therefore was unable to issue the amount of debt necessary to finance the approximately $1 billion in deferred capital expenditure necessary to make the school system viable and competitive, as well as in compliance with safety standards. Serving as bond counsel, Hawkins Delafield & Wood LLP helped develop a credit structure based on annual appropriations of State Aid. The strength of this structure enabled the Agency to attract credit enhancement and thereby achieve highly competitive borrowing rates and the format has been replicated for other City school districts resulting in significant interest rate savings.
State, DC, and Commonwealth Structured Financings
In addition to its role in workouts for distressed municipalities, Hawkins has also been retained by various States and State-like jurisdictions experiencing capital market access or other fiscal pressures such as the District of Columbia and Commonwealth of Puerto Rico to securitize and structure bond issues that are secured by the statutory pledge of one or more taxes such as the sales or income tax rather than reliance on a faith and credit, general obligation debt service pledge and under certain profiles of that issuer, have provided a diverse market option and have been better rated than its general obligation debt. This service requires a very sophisticated appreciation of various constitutional parameters applicable in each jurisdiction but if properly applied results in substantial interest rate savings.