What is a Preliminary Official Statement?

The issuer is responsible for preparing and issuing the POS before the sale date of the transaction. This gives investors time to review the transaction to make a purchasing decision. The POS may omit some information that will be determined on the date of sale, such as the final par, coupon, yield, and prices on the bonds being issued. 

Information in the POS includes, but is not limited to:

• Description of the project being financed — the project type, expected completion date, and so on — or the bonds being refinanced
• General bond security information, such as preliminary maturity dates and call date, if applicable
• Security of financing such as a general obligation or revenue bond, as well as the source of the security, such as taxes or project revenues
• Other debts the issuer has outstanding
• The flow of funds in the transaction
• Management information
• Planned future financings 
• Financial and demographic information pertaining to the issuer
• Litigation outstanding against the issuer

The POS also goes by the nickname “red herring” because of the red-lettered disclaimer down the left side of the cover of the POS document.

What’s important here?

The POS details the anticipated municipal security sale and is a document investors should review before purchasing securities.