Corporate Trust
Connection
Spring 2006
Welcome
from the U.S. Bank Corporate
Trust Services President
s you may be aware, on Dec. 30, 2005,
U.S. Bank completed the purchase of the
corporate trust and institutional custody businesses of Wachovia Corporation. We’d like to
welcome all former Wachovia corporate trust
and institutional custody customers to the
U.S. Bancorp family.
As a result of this transaction, U.S. Bank
Corporate Trust Services has acquired
approximately 14,100 new issuances and
$410 billion in assets under administration.
The acquisition solidifies the position of
U.S. Bank as a leader in the corporate trust
industry. In fact, U.S. Bank now ranks as the
country’s largest tax-exempt debt trustee,
second-largest trustee of asset-back and
mortgage-backed securities, and third-largest
of new corporate bond issuances.
We have also broadened our geographic
presence, adding 19 new corporate trust
offices and institutional custody offices, primarily in the mid-Atlantic and Southeastern
states. Adding these offices establishes
U.S. Bank as a leading corporate trust provider
in the East and Southeast, in addition to our
current front-runner status in the Northwest,
West/Midwest and New England regions.
A
A Seamless Transition
The integration is scheduled to be completed by September. Since U.S. Bank and
Wachovia use similar technology platforms
and many of the same vendors, we fully
expect a smooth transition with little or no
disruption to customers. In addition, since
we expect to retain most of the former
Wachovia corporate trust employees, many
of you can continue to work with the same
individuals with whom you’ve already
established a relationship.
U.S. Bank is committed to providing
former Wachovia customers with the same
high-quality level of products and services
that current U.S. Bank corporate trust
customers have come to expect. And, with
our Five Star Service Guarantee, you can
be assured that we will meet or exceed
specific areas of performance or you will
be compensated.
To learn more about U.S. Bank Corporate
Trust Services, please visit us at
usbank.com/corporatetrust or contact your
Account Manager. We look forward to
working with you.
Sincerely,
See
U.S. Bank rankings
on page 4.
Diane Thormodsgard
President
U.S. Bank Corporate Trust Services and
Institutional Trust & Custody
What’s
inside
2
Spotlight
on Denver
3
4
GASB 45
U.S. Bank
Rankings
Spotlight on the Denver Office
hether your taste runs to sophisticated dining and nightlife, museums and culture or rock climbing and
rodeos, the Mile High City has plenty to
offer – including the Denver field office
of U.S. Bank Corporate Trust Services.
“We have a long history of serving
corporate trust needs in Denver,” says
Adam Dalmy, vice president, business
development. “There’s been a corporate
trust office here for more than 40 years.
As a result, we’ve built deep and lasting
relationships with our customers as well
as investment bankers and attorneys.”
Dalmy and the three Account
Managers in Denver (Seth Dodson, Bill
MacMillan and Hester Stafford) provide
a full range of corporate trust services,
with particular emphasis on municipal
bonds and corporate escrows. “We
work with highway and urban renewal
authorities, among others, and have
acted as trustee for more than $1 billion
in bonds issued by one of our largest
public authority customers,” Dalmy
says. “We also handle a considerable
amount of corporate debenture work.
Among our larger corporate customers
are a major telecommunications
provider and one of the country’s
largest retailers.”
W
Left to right: Seth Dodson,
Hester Stafford, Bill MacMillan,
and Adam Dalmy of the
Denver office.
A Team Commitment
Based in Seattle, Dyan Huhta is vice
president and manager of the administrative staff that includes the Denver
office. “There is a lot of competition in
the Denver area,” Huhta says. “But our
Denver employees have done a wonderful
job capturing a significant part of the
market. This group of hard-working,
talented people has built excellent
relationships with our customers. Their
commitment to the success of those customers and to U.S. Bank is apparent.”
Dalmy credits much of their success
to teamwork, expertise and experience.
“We encourage discussion and interaction, including our partners in Seattle,”
Dalmy says. “If one person is busy,
another will pick up the ball and run
with it. That kind of teamwork creates
a synergy that results in the kind of
service our customers appreciate.”
“
We’ve built deep and lasting relationships with our
customers as well as investment bankers and attorneys.
”
U.S. Bank Corporate Trust Services Locations
Atlanta, Georgia
Boise, Idaho
Boston, Massachusetts
Chicago, Illinois
Cincinnati, Ohio
Cleveland, Ohio
Columbus, Ohio
Dallas, Texas
Denver, Colorado
Detroit, Michigan
Florence, South Carolina
Fort Lauderdale, Florida
Hartford, Connecticut
Helena, Montana
Indianapolis, Indiana
Lansing, Michigan
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Los Angeles, California
Louisville, Kentucky
Milwaukee, Wisconsin
Nashville, Tennessee
New York, New York
Phoenix, Arizona
Pittsburgh, Pennsylvania
Portland, Oregon
Saint Louis, Missouri
Saint Paul, Minnesota
Salt Lake City, Utah
San Francisco, California
Seattle, Washington
Tempe, Arizona
Wilmington, Delaware
Birmingham, Alabama
Charlotte, North Carolina
Columbia, South Carolina
Frederick, Maryland
Houston, Texas
Jacksonville, Florida
Miami, Florida
Morristown, New Jersey
Philadelphia, Pennsylvania
Raleigh, North Carolina
Richmond, Virginia
Roanoke, Virginia
St. Petersburg, Florida
Sacramento, California
San Bernardino, California
Tampa, Florida
Public Sector Employers: Are You Ready for GASB 45?
eginning at the end of this year, new standards for
reporting the costs and obligations of post-employment
healthcare and other nonpension benefits by public sector
employers will be implemented. These benefits are commonly
referred to as other post-employment benefits, or OPEB.
“It’s been called ‘the next great challenge for governments,’”
says Donnie Hurrelbrink, vice president of Institutional Trust
& Custody sales for U.S. Bank.
B
What’s It All About?
The new standards are the result of the Governmental
Accounting Standards Board Statement No. 45, issued in
2004. GASB 45 requires that state and local governments
account for and report the annual cost of OPEB and the
outstanding obligations and commitments related to OPEB in
essentially the same manner as they currently account for and
report pension obligations. The benefits must be accounted for
on an actuarial basis during an employee’s career, instead of the
current pay-as-you-go basis during retirement.
The standards will be phased in over three years, beginning
with governments whose total annual revenues are $100 million
or more (for periods beginning after Dec. 15, 2006) and ending
with governments with less than $10 million in revenues (for
periods beginning after Dec. 15, 2008). Earlier implementation
is encouraged by the GASB.
GASB 45 will highlight the significant obligations of typical
retiree health provisions to public sector employers through an
actuarial analysis of accrued liabilities. GASB 45 requires that
these liabilities be accounted for and reported; it does not
require that they be funded.
Funding May Be a Good Idea
Many governments may find that it’s in their best interests
to fund the liabilities in a trust. VEBA (Voluntary Employees’
Beneficiary Association) trusts and Section 115 integral part
trusts are options that many governments are considering.
“If they don’t fund their liabilities, they run the risk of
bond-rating agencies downgrading their overall debt,”
Hurrelbrink says. “Their ability to pay is reduced if they’re not
proactively managing their GASB 45 liability, so the rating
agencies may lower their ratings. As a matter of fact, several
rating agencies have already released white papers to explain
how they will monitor this new reporting liability.”
Bond Issues May Be a Good Option
One solution for many governments is to fund the liabilities
by issuing OPEB bonds. Similar to Pension Obligation Bonds,
which are issued specifically to fund pension benefit liabilities,
OPEB Obligation Bonds are issued specifically to fund postemployment health care benefit liabilities. “There’s a big incentive for governments to do this,” Hurrelbrink points out. “If
you decide to fund all or a portion of the liability with an
OPEB bond issue and invest those assets in a qualified trust,
then you can apply a greater discount rate to the liability.
OPEB bond proceeds are invested in the trust with greater
earning capacity, thereby potentially increasing the arbitrage
spread between the OPEB bond coupon and the invested
assets of the trust.
“You should be compelled to fund to allow actuaries to use
a long-term discount in their calculations. For example, if you
simply earmark a portion of your general fund balance for
post-employment benefits, you may only use the short-term
interest rate you are receiving on your general fund. If you were
to hold post-employment dollars in trust, you may use a longterm discount rate. This reduces the liability significantly. As a
rule of thumb, for every 1% increase in the discount rate that’s
applied, you could reduce the liability by 20%,” he continues.
“That’s a lot of motivation for governments to seriously look
at funding their liabilities in trust, either on their own or
through the issuance of OPEB bonds, and applying that
discount rate.”
Count on Our Expertise
As the country’s No. 1 municipal trustee, U.S. Bank can
provide valuable assistance to public sector employers thinking
of funding their OPEB liabilities. Contact your U.S. Bank
Corporate Trust Services Account Manager for more information.
INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
While information provided in this newsletter is intended to accurate, its
accuracy is not guaranteed. The publisher, U.S. Bank, is not engaged in
providing tax, legal or accounting services. Should you have any tax, legal
or accounting questions, you are encouraged to seek the advice of competent
tax, legal or accounting professionals.
Source: Summary of Statement No. 45 Accounting and Financial Reporting
by Employers for Postemployment Benefits Other Than Pensions,
Governmental Accounting Standards Board, www.gasb.org.
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Did You Know …
Market share rankings based on all deals done with a trustee.
Tax-Exempt Debt Ranking – 2005
Corporate Debt Rankings – 2005
(U.S. High Yield, U.S. Investment Grade, U.S. Convertible Debt)
Rank
Trustee
No. of
Issues
Mkt. Share
on Issues
Par Amount
(US$ mil)
Rank
Trustee
Proceeds
(US$ mil)
Mkt. Share
on $
No. of
issues
1
U.S. Bank
1168
26.7%
62,288.30
2
Bank of New York
816
18.7%
51,169.50
1
J.P. Morgan
182,435.40
46.0%
409
3
Wells Fargo Bank
610
13.9%
23,416.40
2
Bank of New York
105,553.50
26.6%
221
4
J.P. Morgan Chase & Co.
485
11.1%
36,592.10
3
U.S. Bank
31,960.10
8.1%
90
6,281.90
4
Citigroup
24,250.40
6.1%
26
Deutsche Bank AG
23,022.90
5.8%
38
5
SunTrust Bank
159
3.6%
6
Manufacturers & Traders Trust
104
2.4%
6,147.90
5
7
UMB Bank NA
95
2.2%
1,648.50
6
Wells Fargo Bank NA
15,816.60
4.0%
46
8
Deutsche Bank
94
2.2%
6,679.20
7
Wilmington Trust Co.
4,565.50
1.2%
16
9
Regions Bank
87
2.0%
1,193.90
8
SunTrust Banks
4,331.50
1.1%
14
10
Union Bank of California
74
1.7%
2,329.30
9
HSBC Holdings PLC
1,525.60
0.4%
6
10
CIBC Mellon Trust Co.
1,035.70
0.3%
1
Source: Thomson Financial, SDC – Jan. 16, 2006.
Source: Asset-Backed Alert database, Jan. 16, 2006.
ABS/MBS/CDO Ranking – 2005
Rank
Trustee
Proceeds
(US$ Mil)
Mkt. Share
on $
No. of
Issues
1
Deutsche Bank
342,327.6
22.79%
451
2
U.S. Bank
336,770.6
22.42%
466
3
Bank of New York
243,095.5
16.18%
328
4
J.P. Morgan Chase
204,228.7
13.60%
322
5
Wells Fargo
152,171.3
10.13%
259
6
LaSalle Bank
88,956.7
5.92%
135
7
HSBC Bank
83,338.9
5.55%
108
8
Citibank
23,046.4
1.53%
40
9
Wilmington Trust
7,468.1
0.50%
11
10
Perpetual Trustees
4,000.0
0.27%
4
Source: Asset-Backed Alert database, Jan. 16, 2006.
The articles and information included in this newsletter are for your information and are not intended as legal, accounting or tax advice. While the information is
intended to be accurate, neither U.S. Bank Corporate Trust Services nor the publisher accepts responsibility for relying on the information provided.
©2006 U.S. Bank Corporate Trust Services. Member FDIC.
Comments and suggestions for the newsletter are welcome and should be forwarded to Editor, Corporate Trust Connection, U.S. Bank Corporate Trust Services,
(651) 495-3973 (phone) or marketing.corporatetrust@usbank.com (email). For more information, visit our Web site at usbank.com/corporatetrust.
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