As the range in responsibilities acquired by state and local governments increases, their need for financing also expands. Local capital markets, however, are reluctant to provide funding, because they are unaccustomed to judge municipal credit quality and to estimate repayment risks. Banks, therefore, tend to dominate the credit market. But credit flow by banks to state and local governments has limited possibilities for expansion - particularly if local governments need longer term financing.

Astris Finance helps clients look at all the available credit options, including the option of moving urban services off the municipality's budget and "corporatizing" them to improve credit access. Corporatizing services simply means creating public enterprises around basic services, like water and sanitation, solid waste, and transport, that operate within the commercial code, and whose day-to-day operations are relatively independent from the municipality. This approach helps to clarify and segment municipal credit demand.

Basic municipal credit for general works can often be met by traditional bank financing, while the longer term credit needs of urban services can be met by capital market financing - or by funding schemes that also include private concessions.

Astris finance works with local financial institutions and brokerages to ensure a smooth and cost effective bond placement. We summarize the process of capital market financing in seven important steps.

• Review legal framework within which the municipal authority may issue debt, and the available income sources that can be assigned for repayment.
• Conduct a complete financial review of municipality's financial situation and indebtedness to estimate potential repayment capacity.
• Evaluate local capital market participants and their willingness to invest in municipal debt, including term and price. Discuss possibilities with key financial players such as pension funds, insurance companies, and other contractual savings institutions. Extend similar analysis to banking sector.
• Construct likely debt scenarios based on credit repayment capacity of municipality and investor appetite for municipal instruments. Explore possibilities of enhancing the credit quality of the bond issue by means of credit guarantees, letters of credit, and revolving credit facilities, especially those provided be multilateral agencies (Inter-American Development Bank, World Bank, Caja Andina de Fomento), or by commercial sources such as Dexia Crédit Local.
• Prepare legal documentation of the bond issue, and all associated issuance documentation.
• Obtain all necessary ratings on the issue and authorizations from capital market regulatory agencies.
• Place the debt issue with investors.