Senate Bill No. 500–Committee on Finance

 

CHAPTER..........

 

AN ACT relating to the University Securities Law; 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:

 

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

 the provisions set forth as sections 2 to 5, inclusive, of this act.

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

 competitive bid or negotiated sale, delegate to the chancellor of the

 university or the vice chancellor for finance of the university the

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

 a binding bid for the securities subject to the requirements specified by

 the board concerning:

   (a) The rate of interest on the securities;

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

 called for redemption before maturity;

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

   (d) The principal amount of the securities and the amount of principal

 maturing in any particular year.

   2.  All terms of the securities other than:

   (a) The rate of interest;

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

   (c) The price for the sale of the securities;

   (d) The principal amount of the securities; and

   (e) The requirements for the principal maturing in particular

years,

must be approved by the board before the securities are delivered.

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

 the sale of the securities, principal amount and the requirements for the

 principal amount maturing in particular years are not required to be

 approved by the board if each of those terms complies with the

 requirements specified by the board before the contract for the purchase

 of the securities is signed or the bid for the securities is accepted.

   Sec. 3.  1.  The resolution authorizing the issuance of any securities

 or any trust indenture or other instrument appertaining thereto may fix

 a rate or rates of interest or provide for the determination of the rate or

 rates from time to time by a designated agent according to the procedure

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

 must approximate the rates then being paid for other securities which

 contain similar provisions and have an equivalent rating. The board

 may contract with or select any person to make that determination.

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

 assurance of payment of the principal of, the interest on, or premiums, if

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

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

made pursuant to that agreement may be provided in that agreement,

 recited in those securities or evidenced by another instrument as

 designated in the resolution authorizing the issuance of those securities

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

 rights under that agreement.

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

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

 reimbursement of any advances made under an agreement pursuant to

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

 interest provided by statute, including, without limitation, NRS 396.852.

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

 findings of the board that the procedure specified therein for

 determining that rate or rates is reasonable under existing or anticipated

 conditions in the market and is necessary and advisable for marketing

 the securities. These findings are conclusive. This section does not

 prohibit the board from fixing a maximum rate of interest.

   Sec. 4.  In addition to the investments permitted by NRS 396.861, the

 board, subject to any contractual limitations from time to time imposed

 upon the university by any resolution authorizing the issuance of

 outstanding securities or by any trust indenture or other proceedings

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

 otherwise provided in NRS 396.876, any pledged revenues and any

 proceeds of securities issued hereunder in an investment contract that is

 collateralized with securities issued by the Federal Government or

 agencies of the Federal Government if:

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

 amount invested and any accrued unpaid interest thereon;

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

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

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

 bank authorized to exercise trust powers;

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

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

 met, sufficient additional collateral is deposited with the agent of the

 university to meet that ratio within 2 business days after the

 determination; and

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

 commercial bank, or that party or a guarantor of the performance of

 that party is:

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

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

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

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

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

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

   Sec. 5.  1.  The university, in connection with securities it has issued

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

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

 agreement would be in the best interests of the university.

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

rates only if:

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

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

 recognized rating agency; or

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

 whom the university enters the agreement are either:

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

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

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

 agent of the university which would be legal investments for the state

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

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

 upon which the exchange of interest rates is based.

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

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

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

 variable rate determined pursuant to a formula set forth in the

 agreement on an amount not to exceed the principal amount of the

 securities with respect to which the agreement is made, in exchange for

 an agreement to pay sums equal to interest on the same principal

 amount at a variable rate determined pursuant to a formula set forth in

 the agreement.

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

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

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

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

 exceed the outstanding principal amount of the securities with respect to

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

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

 forth in the agreement.

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

 must not exceed the term of the securities with respect to which the

 agreement was made.

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

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

 pledged to the securities in connection with the agreement as executed,

 so long as the pledge does not violate the terms of any resolution or

 other instrument appertaining to outstanding securities issued

 hereunder.

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

 interest paid pursuant to an agreement entered into pursuant to this

 section.

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

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

 interest on the securities as the amount or rate of interest payable after

 giving effect to the agreement for the purpose of calculating:

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

 revenues are pledged to or used to pay the securities;

   (b) Statutory requirements concerning revenue coverage that are

 applicable to the securities; and

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

securities.

   9.  Subject to covenants applicable to the securities, any payments

 required to be made by the university under the agreement may be made

 from pledged revenues that are pledged to pay debt service on the

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

 other legally available source.

   Sec. 6.  NRS 396.809 is hereby amended to read as follows:

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

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

   Sec. 7.  This act becomes effective on July 1, 2001.

 

²⁰~~~~~⁰¹