3.3.2.3.3. Finalizing the Price: Bond Purchase Agreement
As with a competitive bid, the syndicate will mail a preliminary official statement to potential investors in an effort to solicit their business. A negotiated sale, however, has much more flexibility with regard to setting and changing the sales date or the structure of the issue, in response to market changes. Preliminary prices may be revised upward or downward as the proposal takes shape. An issuer may advance or delay the sale date in an effort to get the best possible terms.
When the issuer and underwriters agree on a set of proposed interest rates, the underwriters will release the pricing to their customers and allow them a certain timeframe in which to enter orders. During this order period, which like a competitive bidding can run from one to five days, the underwriter will monitor the flow of orders. If the issue becomes oversubscribed too quickly, it may recommend lowering the interest rates. If the issue is selling slowly, it may recommend raising the interest rates.
Once the issuer and underwriters agree on a final price, they enter into a b