HomeMy WebLinkAboutContract 25721 CITY SECRETARY f
CONTRACT NO,
AMENDMENT NO.5
TERMS AND RENEWAL AGREEMENT
AMENDMENT AGREEMENT (the "Agreement"), dated November 30, 1999, among
Morgan Stanley & Co. Incorporated ("Morgan Stanley"), the City of Fort Worth, Texas (the
"Customer"), and The Bank of New York(the "Custodian").
WHEREAS, Morgan Stanley and the Customer entered into a Master Repurchase
Agreement, dated October 30, 1989 (the "Master Repurchase Agreement"), as amended on
November 9, 1989 (the "Amendment Agreement") for the purpose of engaging in Paired
Transactions (as defined in the Amendment Agreement), and such Amendment Agreement was
amended on November 9, 1990 and November 12, 1991 for the purpose of setting the Price
Differential for each Repurchase Transaction thereunder and to extend the termination date of the
Amendment Agreement to November 9, 1991 and November 12, 1992, respectively;
WHEREAS, Morgan Stanley, the Customer and the Custodian entered into a Paired
Repurchase Transactions Custody Agreement dated November 9, 1989 (the "Custody Agreement")
as amended by the amendments dated November 9, 1990, and November 12, 1991 for the sole
purpose of extending the termination date of the Custody Agreement to November 9, 1991 and
November 12, 1992, respectively;
WHEREAS, Morgan Stanley, the Customer and the Custodian entered into a Terms and
Renewal Agreement (the "Renewal Agreement") governing a Current Paired Transaction (as
defined in the Renewal Agreement) which commenced on November 12, 1993 and will end on
November 14, 1994 and extending the termination date of the Amendment Agreement and the
Custody Agreement to November 14, 1994;
WHEREAS, Morgan Stanley, the Customer, and the Custodian entered into an Amendment
No. 1 to the Renewal Agreement governing a Current Paired Transaction (as defined in the
Renewal Agreement) which commenced on November 14, 1994 and will end on November 14,
1995 and extending the termination date of the Amendment Agreement and the Custody Agreement
to November 14, 1995;
WHEREAS, Morgan Stanley, the Customer, and the Custodian entered into an Amendment
No. 2 to the Renewal Agreement governing a Current Paired Transaction which commenced on
November 16, 1995 and will end on November 30, 1996 and extending the termination date of the
Amendment Agreement and the Custody Agreement to November 30, 1996;
WHEREAS, Morgan Stanley, the Customer, and the Custodian entered into an Amendment
No. 3 to the Renewal Agreement governing a Current Paired Transaction which commenced on
November 30, 1996 and will end on November 30, 1997 and extending the termination date of the
Amendment Agreement and the Custody Agreement to November 30, 1997;
WHEREAS, Morgan Stanley, the Customer, and the Custodian entered into an Amendment
No. 4 to the Renewal Agreement governing a Current Paired Transaction which commenced on
November 30, 1997 and will end on November 30, 2000 and extending the termination date of the
Amendment Agreement and the Custody Agreement to November 30, 2000; (�
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WHEREAS, Morgan Stanley, the Customer, and the Custodian intend to extend the
termination date of the Current Paired Transaction, the Amendment Agreement, and the Custody
Agreement to November 30, 2002, to set the Price Differential for each Repurchase Transaction
hereunder, and to amend the definition of Eligible Securities;
NOW, THEREFORE, in consideration of the mutual promises set forth hereafter, the
parties agree as follows:
1. Any term used in this Agreement and not defined shall have the meaning set forth in the
Renewal Agreement.
2. Morgan Stanley, the Customer and the Custodian agree to extend the term of the Current Paired
Transaction to November 30, 2002 and that the obligations of each party under the Current Paired
Transaction shall continue to be governed by the provisions of the Renewal Agreement.
3. Paragraph 2 under "Amendments to Amendment Agreement" of the Renewal Agreement shall
be deleted in its entirety and the following provision shall be added in its place:
"2. Paragraph 7(g) of the Amendment Agreement, Miscellaneous, shall be
replaced in its entirety with the following:
`g. This Amendment Agreement shall terminate on November
30, 2002, provided, however, the Customer and Morgan
Stanley may, upon at least 30 days prior notice to the other
party, request a renegotiation of the Price Differential for
each Repurchase Transaction to be applicable as of
November 30, 2000 and November 30, 2001.„'
4. Paragraph 1 under "Amendments to Custody Agreement" of the Renewal Agreement shall be
deleted in its entirety and the following provision shall be added in its place:
Ill.
1. The first sentence of paragraph 1 of Article VI of the Custody Agreement,
Termination, shall be replaced in its entirety with the following:
`This agreement shall terminate on November 30, 2002,
provided, however, the Customer and Morgan Stanley may,
upon at least 30 days prior notice to the other party, request a
renegotiation of the Price Differential for each Repurchase
Transaction to be applicable as of November 30, 2000 and
November 30, 2001."'
5. Paragraph 1(e) of the Amendment Agreement, Definitions, shall be deleted in its entirety
and replaced with the following:
"Eligible Securities" means Purchased Securities that are direct obligations
1o�Ifothle pUpniitIeH�EdiDlSttnahtoes Government, and obligations issued by agencies or instrumentalities of the U.S.
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Government including Federal National Mortgage Association Bullet Benchmark Bills, Notes, and
Bonds and Federal Home Loan Mortgage Corporation Reference Bills,Notes, and Bonds.
6. Paragraph 6 of the Amendment Agreement, Price Differentials and Renewals, as amended
in the Terms and Renewal Agreement dated as of November 2, 1993, shall be replaced in its
entirety with the following:
"a. During the term hereof, for all Paired Transactions, the Price Differential
applicable to each repurchase transaction in which Customer is acting as Seller of United
States Treasury Securities shall, in all cases, be nine (9) basis points less than the Price
Differential applicable to the corresponding repurchase transaction in which Morgan
Stanley is acting as Seller. The Price Differential applicable to each repurchase transaction
involving Eligible Securities which represent the most current U.S. Treasury securities
issued with an original maturity of two, three, five, ten, and thirty years in which Customer
is acting as Seller shall in all cases be thirty five (35) basis points less than the Price
Differential applicable to the corresponding repurchase transaction in which Morgan
Stanley is acting as Seller. The Price Differential applicable to each repurchase transaction
involving Eligible Securities which represent Federal National Mortgage Association Bullet
Benchmark Bills, Notes, and Bonds and Federal Home Loan Mortgage Corporation
Reference Bills, Notes, and Bonds in which Customer is acting as Seller shall in all cases be
ten (10) basis points less than the Price Differential applicable to the corresponding
repurchase transaction in which Morgan Stanley is acting as Seller. Such Price Differentials
shall be effective from November 30, 1999 until November 30, 2000. All payments of net
Price Differential from Morgan Stanley to Customer shall be paid on the last Business Day
of each month during the term hereof or in the event such day is not a Business Day, on the
next succeeding Business Day.
7. This Agreement may be executed in any number of counterparts and all such counterparts taken
together shall be deemed to constitute but one and the same instrument.
8. This Agreement shall be governed and construed in accordance with the laws of the State of
New York without regard to the conflict of law principles thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by
a duly authorized officer or official, as of the date and year first written above.
CITY OF FORT WORTH,TEXAS MORGAN STANLEY&CO.I CO ORATED
By: PLQo�,- a_ ar� By: -� ''���
Name: C kckY 1-eS �Z _ R0 -<.U-)0 Name: DIANE A. PEARL
Title: �5,+ Lt'+,, oaayluHey Title: HHINUIPAL
Approved as to Form and Legality:
THE BANK OF NEW YORK,as Custodian
Ci orney
By:
City Secretary of ort Worth,Texas �" Name:
_ �✓7'�5�� Title: John M orik
Contract Authorization
ice President
Date
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City of Fort Worth, Texas
4Vagor and Council jZommunication
DATE REFERENCE NUMBER LOG NAME PAGE
12/21/99 **C-17781 13MORGAN 1 of 2
SUBJECT CONTRACTS WITH MORGAN STANLEY AND BANK OF NEW YORK FOR SECURITIES
LENDING PROGRAM
RECOMMENDATION:
It is recommended that the City Council authorize the City Manager to execute the necessary
amendments to the City's securities lending program for two years with Morgan Stanley and the Bank
of New York.
DISCUSSION:
Securities lending is a cash management strategy involving the lending of the City's securities to a
primary dealer with the substitution of securities of greater market value being safekept by a third party
custodial bank in an account in the City's name. The program is designed in such a way that the City
earns supplemental income on the portfolio without losing ownership or interest payments on the
loaned securities. The safety of the City's securities is guaranteed. All revenues are deposited in the
General Fund.
The primary dealer will use the borrowed securities in several ways. With these high quality securities,
the dealer can borrow money at a lower interest rate. The dealer can use the funds to finance its own
investment positions or to invest in short-term, higher yielding investments. The borrowed bond can
also be used to correct "fails." When any investor buys a bond from a primary dealer, the primary
dealer often is buying it from another institution, which is also buying it from someone, etc. Any
breakdown in this chain causes "fails" down the line. If a primary dealer has access to bonds through
security lending, it can avoid fails and any associated costs.
The City Council first approved a one-year contract for a securities lending program with Morgan
Stanley and with the Bank of New York as custodian on October 17, 1989, (M&C C-11945). Those
annual agreements were last extended on October 10, 1997, (M&C C-16399). Since its inception, the
program has generated $1,800,000 for the General Fund.
The current amendment has a final expiration date of November 30, 2000, but the City and Morgan
Stanley may renegotiate terms and fees annually. Due to changes in the marketplace, Morgan Stanley
has proposed changes in the fees it pays and the securities it accepts.
During the past three years, Morgan Stanley has used the City's portfolio of U.S. Treasury securities
and compensated the City at a rate of 6 basis points (0.06%) times the market value and accrued
interest earnings of the portfolio. The City receives this fee monthly regardless of lending activity.
Recently issued Treasuries, referred to as "on-the-run," are compensated at a rate of 35 basis points.
Morgan Stanley pays all custodial fees.
City of Fort Worth, Texas
Iy Ayor And Council Communication
DATE REFERENCE NUMBER LOG NAME PAGE
12/21/99 **C-17781 13MORGAN 2 of 2
SUBJECT CONTRACTS WITH MORGAN STANLEY AND BANK OF NEW YORK FOR SECURITIES
LENDING PROGRAM
With the decline of the Federal debt, U.S. Treasuries have become more valuable. Furthermore, the
benchmark securities of certain government instrumentalities have also increased in value. Morgan
Stanley proposes to amend the existing securities lending program by raising the fee for Treasuries to 9
basis points. The fee for on-the-run Treasuries remains 35 basis points. The firm has also offered a
fee of 10 basis points for any benchmark bills, notes and bonds of the Federal National Mortgage
Association ("Fannie Mae") and any benchmark reference bills, notes and bonds of the Federal Home
Loan Mortgage Corporation ("Freddie Mac"). Assuming an average portfolio of $114 million in
Treasuries and $114 million in eligible agencies, Morgan Stanley's proposal will generate $216,600 in
fees for this fiscal year versus $120,000 in the previous fiscal year. The new amendment will run for
two years with annual options to review and renegotiate the fee structure depending on prevailing
market conditions.
FISCAL INFORMATION/CERTIFICATION:
The Finance Department will be responsible for the collection of fees due the City under the program.
All fees will be deposited in the General Fund.
CB:j
Submitted for City Manager's FUND ACCOUNT CENTER AMOUNT CITY SECRETARY
Office by: (to)
GG01 441123 0134010
Charles Boswell 8511 APPROVED
Originating Department Head: CITY COUNCIL
Jim Keyes 8517 (from) v
) DEC 21 WS
Additional Information Contact:
w�aJ
Robert Shook 8519 City Secretary of the
City Of Fort woft1:,Texas