Evaluation of underwriter's municipal bond purchase proposal (predetermination of the proceedings in the case of eventual negotiated sale of municipal bonds in the city of Shtip)

摘要

There is some degree of misperception concerning the superiority of the competitive sale as the evidenceudsuggests that large portion of municipal emissions take the form of negotiated purchase. The following article describes theudprocedure for negotiation of the eventual bond emissions in municipality of Shtip, Republic of Macedonia. The aim is toudpredetermine the most cost-effective method for evaluation of underwriter’s municipal bond purchase proposal due to theudsubstantial inexperience and deficit of expertise of the city’s internal services. The literature offers various measuresudavailable to compare the relative costs of bond financing proposals. While net interest cost and net-present value areudconsidered improper, it is thought that the best reliance for the purpose comes from the true interest cost method. Theudprocedure incorporates calculation of true interest cost and duration of the underwriter’s proposal and matching them withudthose for a sample group of similar bonds. In this particular case, as there are no other municipals to compare with, thatudwould be the only available bond market index of the Macedonian Stock Exchange named OMB, with a portfolio completelyudmade of long-term government securities.