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STIFEL <br />6. Structuring Ideas and Marketing Plan for Proposed Debt Issuance <br />i. Specific Structuring Ideas <br />A. It is the City's current expectation to issue pension obligation bonds by December 31, 2021. Describe how your firm would structure the proposed 2021 POBs on a <br />traditional fixed rate basis assuming a not to exceed par value of approximately $671 million (90% of the UAL) and $372 million (50% of the UAL). Please provide the <br />coupons on a maturity -by -maturity basis and the overall True Interest Cost (TIC). Identify spreads to Treasuries on a maturity -by -maturity basis. Furthermore, provide <br />comparable pricing information that supports your proposed spreads to Treasuries. Also, please include a Sources and Uses of Funds with a detailed breakout of all <br />cost assumptions. <br />Based on market conditions as of March 8, 2021, we present our proposed structure below. A breakout of the Sources <br />and Uses is provided in Appendix E. Note that our proposed structure will be the same, regardless of the size of the POBs. <br />Please see below and refer to question 6 for a list of all our assumptions and structuring recommendations. <br />A Few Notes on Our Proposed Structure <br />✓ Designed to Maximize Investor Participation: Our structure contemplates serial bonds through 2039 (much longer <br />than any other recent POB) and two term bonds in 2041 and 2044 (our recommended final maturity). <br />✓ No Reserve Fund: The lack of a reserve fund will not impact the marketing or pricing given the expected 'AA' rating. <br />✓ Standalone S&P Rating: As detailed in the Rating Strategy section, Stifel recommends securing a rating from S&P <br />alone, as it has the most favorable view of POBs among the three major rating agencies. <br />✓ Optional Call Flexibility: 10-year optional call to preserve future flexibility to refinance. <br />Process to Deriving our Proposed Spreads. Five pension financings have come to market since the beginning of the year, <br />all 'AA' rated by S&P. Because these comparable transactions priced at different times in varying market conditions, it is <br />important to evaluate not only their performance in the primary market but also their secondary market trades in recent <br />weeks. Our analyses of these trends along with the City's strong underlying credit lead us to our proposed spreads, which <br />are based on market conditions as of March 8, 2021. Our resulting estimated true interest cost is 2.76%. <br />As previously mentioned, Stifel has more pension financing experience than any other firm; experience that includes some <br />of the lowest yielding long-term POBs that have ever come to market (Glendora, Chula Vista, and Orange). With our proven <br />performance track record, we are confident that we can deliver the most aggressive pricing possible for the City. <br />Issuer <br />City of Santa Ana City of Orange <br />City of Chula Vista <br />City of Downey City of Monterey Park City of El Cajon <br />Issue <br />POBs POBs <br />POBs <br />POBs POBs POBs <br />Par <br />TBD $286,485,000 <br />$350,025,000 <br />$113,585,000 $106,335,000 $147,210,000 <br />Callable <br />10-Year Par Call 9/1/2030 @ 100 <br />6/1/2031 @ 100 <br />6/1/2030 @ 100 6/1/2031 @ 100 4/1/2030 @ 100 <br />S&P <br />AA (Expected) AA <br />AA <br />AA AA AA <br />Insurance <br />TBD BAM: Term Bonds <br />BAM: Bifurcated Term Bonds <br />None None None <br />Manager <br />TBD Stifel (Lead) <br />Stifel (Sole) <br />BofA (Lead) Ramirez (Lead) BofA (Sole) <br />Sale Date <br />Q4 20" March 3, 2021 <br />February 11, 2021 <br />February 9, 2021 February 2, 2021 January 13, 2021 <br />2022 <br />1 0.290 <br />1 0.160 1 2-yr +0.13 <br />+2Rl <br />00.21541 0.111 2yr +0.04 <br />`0.213 0.113 2yr +0.10 0.449 0.149 2yr +0.30 <br />2023 <br />0.360 <br />9 141 2-yr <br />10.160 2yr +0.13 <br />0.317 0.117 2yr +0.20 0.363 0.113 2yr +0.25 0.649 0.149 2yr +0.50 <br />2024 <br />0.589 <br />0.339 3-yr +0.25 0.587 0.2 3-yr +0.30 <br />0.419 0.179 3yr +0.24 <br />0.487 0.187 3yr +0.30 0.626 0.176 3yr +0.45 0.927 0.227 3yr +0.70 <br />2025 <br />1.047 <br />0.847 5-yr +0.20 o.974 0.724 5- +0.25 <br />0.660 0.460 Syr +0.20 <br />0.772 0.472 Syr +0.30 0.887 0.437 Syr +0.45 1.179 0.479 Syr +0.70 <br />2026 <br />1.297 <br />0.847 5-yr +0.45 1.224 0.724 5-yr + 0 <br />0.840 0.460 Syr +0.38 <br />0.972 0.472 Syr +0.50 1.087 0.437 Syr +0.65 1.429 0.479 Syr +0.95 <br />2027 <br />1.680 <br />1.280 7-yr +0.40 1.587 1.137 7-yr +0.4 <br />1.164 0.804 7yr +0.36 <br />1.367 0.817 7yr +0.55 1.430 0.780 7yr +0.65 1.696 0.796 7yr +0.90 <br />2028 <br />1.880 <br />1.280 7-yr +0.60 1.787 1.137 7-yr +0.65 <br />1. 4 0.804 7yr +0.61 <br />1.567 0.817 7yr +0.75 1.630 0.780 7yr +0.85 1.896 0.796 7yr +1.10 <br />2029 <br />2.141 <br />1.591 10-yr +0.55 2.070 1.470 10-yr +0.60 <br />1.628 13810yr +0.49 <br />1.750 1.150 10yr +0.60 1.793 1.093 10yr +0.70 2.090 1.090 10yr +1.00 <br />2030 <br />2.291 <br />1.591 10-yr +0.70 2.220 1.470 10-yr +0.75 <br />1.728 1.1 10yr +0.59 <br />1.850 1.150 10yr +0.70 1.893 1.093 10yr +0.80 2.190 1.090 10yr +1.10 <br />2031 <br />2.391 <br />1.591 10-yr +0.80 2.270 1.470 10-yr +0.80 <br />1.828 1.1381 +0.69 <br />1.950 1.150 10yr +0.80 1.993 1.093 10yr +0.90 2.290 1.090 10yr +1.20 <br />2032 <br />2.491 <br />1.591 10-yr +0.90 2.450 1.470 10-yr +0.98 <br />1.938 1.138 10yr .80 <br />2.050 1.150 10yr +0.90 2.093 1.093 10yr +1.00 2.390 1.090 10yr +1.30 <br />2033 <br />2.591 <br />1.591 10-yr +1.00 2.550 1.470 10-yr +1.08 <br />2.048 1.138 10yr +0.9 <br />2.150 1.150 10yr +1.00 2.193 1.093 10yr +1.10 2.490 1.09010yr +1.40 <br />2034 <br />2.691 <br />1.591 10-yr +1.10 2.650 1.470 10-yr +1.18 <br />2.138 1.138 10yr +1.00 <br />01.15010yr +1.10 2.293 1.093 10yr +1.20 2.640 1.090 10yr +1.55 <br />2035 <br />2.791 <br />1.591 10-yr +1.20 2.750 1.470 10-yr +1.28 <br />2.298 1.138 10yr +1.16 <br />2.35 5010yr +1.20 2.393 1.093 10yr +1.30 2.740 1.090 10yr +1.65 <br />2036 <br />2.891 <br />1.591 10-yr +1.30 2.820 1.470 10-yr +1.35 <br />2.398 1.138 10yr +1.26 <br />2.493 1.093 10yr +1.40 2.790 1.090 10yr +1.70 <br />2037 <br />2.991 <br />1.591 10-yr +1.40 <br />2.488 1.138 10yr +1.35 <br />2038 <br />3.041 <br />1.591 10-yr +1.45 <br />2039 <br />3.091 <br />1.591 10-yr +1.50 <br />2040 <br />3.015 2.265 30-yr +0.75 <br />2.845 1.945 30yr +0.90 <br />2041 <br />3.155 <br />2.305 30-yr +0.85 <br />2.81/2.71 1.955 30yr+0.85/0.75 <br />2043 <br />3.021 1.871 30 +1.15 3.284 1.834 30yr +1.45 <br />2044 <br />3.255 <br />2.305 30-yr +0.95 3.115 2.265 30-yr +0.85 <br />2.995 1.945 30yr +1.05 <br />2045 <br />2.91/2.81 1.955 30yr+0.95/0.85 <br />L Takeaways: Relative to Orange POBs: <br />Tighter (Lower) Spreads 2022-2036; <br />\L Serialization Out Much Longer; Expected Insurance on Term Bonds <br />City of Santa Ana I Proposal to Provide Underwriting Services Page 8 <br />