Senate Bill No. 500–Committee on Finance

 

March 26, 2001

____________

 

Referred to Committee on Finance

 

SUMMARY—Revises various provisions of University Securities Law. (BDR 34‑915)

 

FISCAL NOTE:            Effect on Local Government: No.

                                    Effect on the State: No.

 

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

AN ACT relating to the University Securities Law; revising provisions governing security interests in connection with bonds, notes or other borrowings of the University and Community College System of Nevada; authorizing the board of regents of the University of Nevada to delegate its authority concerning the sale of securities; authorizing variable rates of interest on securities; authorizing the investment of pledged revenues and the proceeds of securities in certain investment contracts; authorizing agreements for an exchange of interest rates; and providing other matters properly relating thereto.

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

1-1    Section 1. Chapter 396 of NRS is hereby amended by adding thereto

1-2  the provisions set forth as sections 2 to 6, inclusive, of this act.

1-3    Sec. 2.  1.  The creation, perfection, priority and enforcement of a

1-4  lien on pledged revenues or other money to secure a bond, note or other

1-5  evidence of borrowing issued under the provisions of the University

1-6  Securities Law must be as specified in the University Securities Law and

1-7  in the instruments approved by the board or the officer of the university

1-8  authorized to issue the bond, note or other evidence of borrowing.

1-9    2.  It is the purpose of this section to provide expressly for the

1-10  creation, perfection, priority and enforcement of a security interest

1-11  created by the university in pledged revenues or other money in

1-12  connection with bonds, notes or other borrowings of the university

1-13  incurred under the University Securities Law, for the purpose of

1-14  paragraph (b) of subsection 3 of NRS 104.9109.

1-15    3.  Any lien on pledged revenues or other money created to secure a

1-16  bond, note or other evidence of borrowing issued pursuant to the

1-17  provisions of the University Securities Law has priority over any lien

1-18  thereon created pursuant to the provisions of chapter 104 of NRS, unless

1-19  otherwise provided in the instrument creating the lien to secure the bond,

2-1  note or other evidence of borrowing issued pursuant to the provisions of

2-2  the University Securities Law.

2-3    Sec. 3.  1.  The board may, before any sale of securities, whether by

2-4  competitive bid or negotiated sale, delegate to the chancellor of the

2-5  university or the vice chancellor for finance of the university the

2-6  authority to sign a contract for the purchase of the securities or to accept

2-7  a binding bid for the securities subject to the requirements specified by

2-8  the board concerning:

2-9    (a) The rate of interest on the securities;

2-10    (b) The dates on which and the prices at which the securities may be

2-11  called for redemption before maturity;

2-12    (c) The price at which the securities will be sold; and

2-13    (d) The principal amount of the securities and the amount of principal

2-14  maturing in any particular year.

2-15    2.  All terms of the securities other than:

2-16    (a) The rate of interest;

2-17    (b) The dates and prices for the redemption of the securities;

2-18    (c) The price for the sale of the securities;

2-19    (d) The principal amount of the securities; and

2-20    (e) The requirements for the principal maturing in particular
years,

2-21  must be approved by the board before the securities are delivered.

2-22    3.  The final rate of interest, dates and prices of redemption, price for

2-23  the sale of the securities, principal amount and the requirements for the

2-24  principal amount maturing in particular years are not required to be

2-25  approved by the board if each of those terms complies with the

2-26  requirements specified by the board before the contract for the purchase

2-27  of the securities is signed or the bid for the securities is accepted.

2-28    Sec. 4.  1.  The resolution authorizing the issuance of any securities

2-29  or any trust indenture or other instrument appertaining thereto may fix a

2-30  rate or rates of interest or provide for the determination of the rate or

2-31  rates from time to time by a designated agent according to the procedure

2-32  specified in that resolution or other instrument. The rate so determined

2-33  must approximate the rates then being paid for other securities which

2-34  contain similar provisions and have an equivalent rating. The board may

2-35  contract with or select any person to make that determination.

2-36    2.  The board may enter into an agreement with a third party for an

2-37  assurance of payment of the principal of, the interest on, or premiums, if

2-38  any, due in connection with any securities issued by the board. The

2-39  obligation of the board to reimburse that third party for any advances

2-40  made pursuant to that agreement may be provided in that agreement,

2-41  recited in those securities or evidenced by another instrument as

2-42  designated in the resolution authorizing the issuance of those securities

2-43  or any other instrument appertaining thereto. The board may assign its

2-44  rights under that agreement.

2-45    3.  In fixing the rate or rates of interest for securities pursuant to

2-46  subsection 1 or the rate or rates of interest imposed on the board for

2-47  reimbursement of any advances made under an agreement pursuant to

2-48  subsection 2, the board is not subject to any limitations on rates of

3-1  interest provided by statute, including, without limitation, NRS 396.852.

3-2  The resolution fixing that rate or rates of interest must contain the

3-3  findings of the board that the procedure specified therein for determining

3-4  that rate or rates is reasonable under existing or anticipated conditions in

3-5  the market and is necessary and advisable for marketing the securities.

3-6  These findings are conclusive. This section does not prohibit the board

3-7  from fixing a maximum rate of interest.

3-8    Sec. 5.  In addition to the investments permitted by NRS 396.861, the

3-9  board, subject to any contractual limitations from time to time imposed

3-10  upon the university by any resolution authorizing the issuance of

3-11  outstanding securities or by any trust indenture or other proceedings

3-12  appertaining thereto, may cause to be invested and reinvested, except as

3-13  otherwise provided in NRS 396.876, any pledged revenues and any

3-14  proceeds of securities issued hereunder in an investment contract that is

3-15  collateralized with securities issued by the Federal Government or

3-16  agencies of the Federal Government if:

3-17    1.  The collateral has a market value of at least 102 percent of the

3-18  amount invested and any accrued unpaid interest thereon;

3-19    2.  The university receives a security interest in the collateral that is

3-20  fully perfected and the collateral is held in custody for the university or

3-21  its trustee by a third-party agent of the university which is a commercial

3-22  bank authorized to exercise trust powers;

3-23    3.  The market value of the collateral is determined not less

3-24  frequently than weekly and, if the ratio required by subsection 1 is not

3-25  met, sufficient additional collateral is deposited with the agent of the

3-26  university to meet that ratio within 2 business days after the

3-27  determination; and

3-28    4.  The party with whom the investment contract is executed is a

3-29  commercial bank, or that party or a guarantor of the performance of that

3-30  party is:

3-31    (a) An insurance company which has a rating on its ability to pay

3-32  claims of not less than “Aa2” by Moody’s Investors Service, Inc., or

3-33  “AA” by Standard and Poor’s Ratings Services, or their equivalent; or

3-34    (b) An entity which has a credit rating on its outstanding long-term

3-35  debt of not less than “A2” by Moody’s Investors Service, Inc., or “A” by

3-36  Standard and Poor’s Ratings Services, or their equivalent.

3-37    Sec. 6.  1.  The university, in connection with securities it has issued

3-38  or proposes to issue, may enter into an agreement for an exchange of

3-39  interest rates as provided in this section if the board finds that such an

3-40  agreement would be in the best interests of the university.

3-41    2.  The university may enter into an agreement to exchange interest

3-42  rates only if:

3-43    (a) The long-term debt obligations of the person with whom the

3-44  university enters the agreement are rated “A” or better by a nationally

3-45  recognized rating agency; or

3-46    (b) The obligations pursuant to the agreement of the person with

3-47  whom the university enters the agreement are either:

3-48      (1) Guaranteed by a person whose long-term debt obligations are

3-49  rated “A” or better by a nationally recognized rating agency; or

4-1       (2) Collateralized by obligations deposited with the university or an

4-2  agent of the university which would be legal investments for the state

4-3  pursuant to NRS 355.140 and which have a market value at the time the

4-4  agreement is made of not less than 100 percent of the principal amount

4-5  upon which the exchange of interest rates is based.

4-6    3.  The university may agree, with respect to securities that the

4-7  university has issued or proposes to issue bearing interest at a variable

4-8  rate, to pay sums equal to interest at a fixed rate or rates or at a different

4-9  variable rate determined pursuant to a formula set forth in the agreement

4-10  on an amount not to exceed the principal amount of the securities with

4-11  respect to which the agreement is made, in exchange for an agreement to

4-12  pay sums equal to interest on the same principal amount at a variable

4-13  rate determined pursuant to a formula set forth in the agreement.

4-14    4.  The university may agree, with respect to securities that the

4-15  university has issued or proposes to issue bearing interest at a fixed rate

4-16  or rates, to pay sums equal to interest at a variable rate determined

4-17  pursuant to a formula set forth in the agreement on an amount not to

4-18  exceed the outstanding principal amount of the securities with respect to

4-19  which the agreement is made, in exchange for an agreement to pay sums

4-20  equal to interest on the same principal amount at a fixed rate or rates set

4-21  forth in the agreement.

4-22    5.  The term of an agreement entered into pursuant to this section

4-23  must not exceed the term of the securities with respect to which the

4-24  agreement was made.

4-25    6.  The university’s obligations to make payments under the

4-26  agreement may be secured by any of the pledged revenues that are

4-27  pledged to the securities in connection with the agreement as executed,

4-28  so long as the pledge does not violate the terms of any resolution or other

4-29  instrument appertaining to outstanding securities issued hereunder.

4-30    7.  Limitations upon the rate of interest on securities do not apply to

4-31  interest paid pursuant to an agreement entered into pursuant to this

4-32  section.

4-33    8.  If the university has entered into an agreement pursuant to this

4-34  section with respect to those securities, it may treat the amount or rate of

4-35  interest on the securities as the amount or rate of interest payable after

4-36  giving effect to the agreement for the purpose of calculating:

4-37    (a) Rates and charges of a revenue-producing enterprise whose

4-38  revenues are pledged to or used to pay the securities;

4-39    (b) Statutory requirements concerning revenue coverage that are

4-40  applicable to the securities; and

4-41    (c) Any other amounts which are based upon the rate of interest of the

4-42  securities.

4-43    9.  Subject to covenants applicable to the securities, any payments

4-44  required to be made by the university under the agreement may be made

4-45  from pledged revenues that are pledged to pay debt service on the

4-46  securities with respect to which the agreement was made or from any

4-47  other legally available source.

 

 

5-1    Sec. 7.  NRS 396.809 is hereby amended to read as follows:

5-2    396.809  NRS 396.809 to 396.885, inclusive, [shall] and sections 2 to

5-3  6, inclusive, of this act may be known as the University Securities Law.

5-4    Sec. 8.  This act becomes effective on July 1, 2001.

 

5-5  H