The Value of Paying Agent Services
By Dawn Gunderson, Financial Advisor
Principal and interest payments for registered issues of municipal securities are
made to the Depository Trust Company (DTC) which receives issuer payments,
and in turn, pays registered bond holders. Some issuers choose to make their debt
payments directly to DTC, while others engage a “paying agent” for this purpose.
Ehlers provides paying agent services through an affiliate company,
Bond Trust Services Corporation.
Role of the Paying Agent
Paying agents maintain a record of the issuer’s debt obligations they have been contracted to administer,
notify the issuer in advance of payment due dates, collect the amounts due, and make payment on the
issuer’s behalf to DTC. The paying agent also handles other administrative actions, such as processing
of mandatory redemption notices for term bonds.
Reasons for Using a Paying Agent

Timely Notice. We regularly receive inquiries from issuers that did not receive notification from
DTC of an upcoming payment due date. Since issuers are ultimately responsible for timely
payment to bond holders, engaging a paying agent provides a reliable and cost effective reminder
system to minimize the chance of missing a payment, or making a late payment.

Continuity. Utilization of a paying agent ensures that issuer staff departures or turnover do not
create the potential for missed or late payments that could occur when institutional knowledge is
lost or diminished.

Representation. When problems such as discrepancies in payment amounts occur, the paying
agent will work directly with DTC as the issuer’s representative to resolve the discrepancy.
Paying agent staff are familiar with common payment problems, such as those that sometimes
result following refunding, and know who to contact at DTC to resolve them quickly.
Important Tips When Not Using a Paying Agent
While there is no requirement that an issuer use a paying agent, not doing so means that issuer staff must
be particularly attentive to debt payment deadlines. A missed or late debt payment can adversely impact
an issuer’s future cost of and access to capital, and is considered a reportable “material event” under
Securities and Exchange Commission Rule 15c2-12. To minimize this possibility, we recommend:

Development of a reliable record keeping and tracking system that can survive changes in
technology platforms. Issuer staff must have an internal reminder system of payment amounts
and due dates that can be relied on for the entire life of the issue.

Ensuring that more than one staff member is familiar with the tracking system, required actions,
and the ability to make a wire transfer to DTC.
If you are considering using paying agent services, or would like to learn more about them, please
contact your Ehlers Financial Advisor.