Compact Funds Financing

Editor’s note: Chapter 5, with subchapters I through VI, of this title were enacted by PL 5-121. Chapters 1 through 4 were reserved. Title 58 itself was not given a title by PL 5-121, but the chapter title designated reflects the name of the Act.

Issuance of Bonds


§ 531. Resolution.
§ 532. Medium of payment; Place of payment.
§ 533. Reference to act.
§ 534. Duties of secretary.
§ 535. Signatures; Seal.
§ 536. Temporary Bonds.
§ 537. Public or negotiated sale.

§ 531. Resolution.

(1) Whenever the committee determines that the sale of any bonds, notes or other evidence of indebtedness is necessary or desirable, it shall adopt a resolution authorizing the issuance and sale of Bonds. The resolution shall authorize and direct the Secretary to arrange for the preparation of the requisite number of suitable Bonds, in registered form (unless the resolution directs the Bonds to be issued in book entry form), and either shall specify as to such Bonds then to be sold, or shall authorize the execution of the Indenture or certificates or orders pursuant to an existing Indenture, which together shall contain, the following information:

(a) Whether the Bonds shall be general or limited obligations of the FSM;

(b) The currency in which any or all of the Bonds are to be repaid, aggregate number, denominations and the date of the Bonds to be sold;

(c) The dates of maturity, the amount of the Bonds maturing at each date of maturity, which amounts need not be equal, and the establishment of any sinking fund schedule or schedules;

(d) Whether the Bonds are to be subject to optional and/or mandatory redemption prior to maturity, and, if so, the provisions for such redemption, the manner of the call thereof, and the price or prices at which the Bonds shall be subject to redemption;

(e) The annual rate, or rates, of interest which the Bonds to be issued shall bear, which rate or rates may be determined at the time of the sale of the Bonds and which rate or rates may be fixed or variable in accordance with a formula provided for in the resolution or the Indenture;

(f) The interest payment dates;

(g) Whether the Bonds shall be issued in certificate form and/or in book entry form; if the Bonds are to be issued in certificate form, the form and language of the Bonds, and, if the Bonds are to be issued in book entry form, whether the book entry system and register shall be maintained by the Secretary, the Trustee, or another agent;

(h) Whether the right is reserved to make delivery in the form of temporary or interim bonds, certificates, or receipts, exchangeable for definitive Bonds when executed and available for delivery, and, if such right is reserved, the denominations and form of such temporary securities;

(i) Whether the Bonds are to be sold at public sale or negotiated sale and, if a public sale, the method of determining the lowest interest cost bid, and, if a negotiated sale, the lowest purchase price to be received by the FSM in any public offering or private placement of the Bonds;

(j) Whether the Bonds shall be in the nature of commercial paper (i.e., issued in large denominations and scheduled to mature in 270 days or less);

(k) Whether all or any portion of the Bonds shall be additionally secured by Credit Enhancement and, if so, an authorization of the terms and conditions thereof;

(l) The restrictive and financial covenants governing the Bonds, if any;

(m) The appointment of the Trustee, and additional fiscal agents, registrars or paying agents, if any;

(n) The place of issuance of the Bonds, which may be inside or outside the territorial limits of the FSM;

(o) The law governing the Indenture and the Bonds;

(p) If applicable, the designated sub-fund within the Bond Repayment Fund into which all moneys pledged to the payment of the Bonds shall be placed in accordance with section 522(1) and subchapter V of chapter 6 of title 55 of this code;

(q) Whether in conjunction with issuance and sale of the Bonds, the FSM shall enter into one or more agreements relating to transfer or mitigation of currency or interest rate risks, minimization of borrowing costs or similar fiscal purposes between the FSM and any counterparties, commercial or investment banks, dealers or similar parties (“swap instruments”), which may include indemnities; and

(r) Any and all other terms and conditions of the Bonds and of the execution, issuance and sale thereof, which shall be consistent with all of the provisions of this chapter or any other applicable law of the FSM or a participating State.

(2) The resolution or the Indenture may also authorize the Secretary to determine certain terms as specified in the resolution or Indenture, including but not limited to, the interest rate or rates, maturity or redemption date or dates, and purchase price of the Bonds, provided, however, that the committee shall determine in the resolution or the Indenture shall specify the maximum rate of interest, latest maturity date and lowest purchase price permitted for the Bonds.

Source: PL 5-121 § 11; amended by PL 5-136 § 7.

Cross-reference: Subchapter V of chapter 6 (Funds) of Title 55 (Government Finance and Contracts) is on the Bond Repayment Fund.

§ 532. Medium of payment; Place of payment.

Principal of, and interest and premium, if any, on the Bonds shall be payable in the currency designated by the committee in the resolution at the office of any FSM Fiscal Agent or at the office of the Secretary.

Source: PL 5-121 § 12.

§ 533. Reference to Act.

Each Bond shall contain a reference to this Compact Funds Financing Act, and if subject to call or redemption prior to maturity, a recital to that effect.

Source: PL 5-121 § 13.

§ 534. Duties of Secretary.

Immediately after the adoption by the committee of any resolution in conformity with section 531 of this chapter, the Secretary shall make any determinations required at or immediately prior to the sale of the Bonds and shall arrange for the preparation of the requisite number of suitable Bonds, in accordance with the resolution.

Source: PL 5-121 § 14.

§ 535. Signatures; Seal.

Each Bond issued in certificate form shall bear the manual or facsimile signature of the Secretary and an impress or a facsimile of the seal of the FSM. Each such signature shall be that of the person who shall be in office at the date of authorizing the affixing thereof. Bonds so executed, when sold and authenticated by an FSM Fiscal Agent, shall be valid and binding notwithstanding any of such persons having ceased to hold their respective offices before the issuance and delivery of the Bonds.

Source: PL 5-121 § 15; amended by PL 5-136 § 8.

§ 536. Temporary Bonds.

If the right so to do has been reserved in the resolution adopted in conformity with section 531 of this chapter, temporary or interim Bonds, certificates, or receipts may be issued and delivered in lieu of definitive Bonds, and shall be exchangeable for such definitive Bonds when they are executed and available.

Source: PL 5-121 § 16.

§ 537. Public or negotiated sale.

The Bonds shall be sold by the Secretary at such time as may be fixed by the Secretary and upon such notice as the Secretary may deem advisable, or at such later time to which the sale shall have been continued, either at public sale, upon sealed bids, to the bidder whose bid will result in the lowest cost, based upon net/true/or other method generally accepted in the financial community for calculation of interest cost on account of those Bonds, or at negotiated sale as set forth in the resolution. If the Bonds are to be sold at public sale, the method of determining the lowest interest cost bid shall be prescribed in the resolution. The Secretary may sell the Bonds at a price below the par value thereof. The interest, if any, accrued to the date of delivery of and payment for the Bonds shall be added to the sale price of the Bonds in any case. The sale shall be for cash, payable upon delivery of Bonds in definitive form, or if the right to deliver temporary securities has been reserved, then upon delivery of the temporary securities.

Source: PL 5-121 § 17.