144A Bond Offering: How To Get Up To 100% LTV/LTC Project Financing
144A bond is a privately issued debt security that is unregistered by the SEC, and traded only between qualified institutional investors who meet a net worth threshold.
It is a United States (U.S.) based bond offering which is considered to be a less costly alternative to initial public offering (IPO).
144A Bond Regulations
144A bond offering falls under SEC rule 144A issued in 1990 to facilitate the resale of unregistered securities, in a more liquid and efficient institutional resale market.
Who Can Issue 144A Bonds?
Trading of 144a security is limited only to between 144a bond financing companies and qualified institutional investors under Rule 144A.
144a bond financing companies include a vast majority of institutions that can be regarded as accredited investors under the SEC securities laws.
Under the rule, the companies can engage in transactions the SEC would normally rate too risky for the general public.
Institutions can make trades even without proof of registration of the underlying issuer by the SEC.
We provide a link to 144a bond financing companies and underwriter groups, and assist our clients worldwide who want to achieve their business financing objectives.
We can help you secure up to 100% LTV/LTC project financing through 144a bond securities.
Minimum funding request of US$10 million and higher required for innovative financing and structuring. Request funding!
144a bond financing companies are clever enough to undertake due diligence without needing SEC help.
Individual investors most often lack resources to verify claims from issuers without seeking help from the agency.
SEC rule 144A stipulates a two year holding period. This means qualified U.S. institutional investor buying the bond from an issuer, cannot transfer ownership of it for two years.
This makes short-term investment in 144a bond programs possible. 144A bond issued by a qualified company has a maturity date that lasts for more than 10 years.
On the contrary, a 144A note matures within 10 years of the date of issue.
Since mid-2014, the Financial Industry Regulatory Authority (FINRA) with their Trade Reporting and Compliance Engine, started reporting transaction data for Rule 144A trades in the corporate bond funding program.
This enhanced transparency made access to more information about trade and transactions in the corporate debt market easily available.
All financial market participants including professional investors, now have a more efficient way of pricing and valuation of 144a bond offerings.
Most transactions involving securities of foreign companies are, however, not subject to SEC scrutiny.
This exposes U.S. based companies to the potential for fraudulent misrepresentations from foreign issuers.
However, the rule also reduces the risks to the industry by allowing companies to spread the risk from foreign issued 144a bonds in private placements.
This makes it easier for companies to issue private placement bonds by essentially facilitating a secondary market among corporations for those bonds.
It also makes regular initial public offerings (IPO) and other public issuance less attractive to institutional investors, and leaves individual investors with fewer investment options.
A 144A bond issue is for United States resident qualified corporations, and is but not always settled through DTCC in the U.S. and Euroclear or Clear stream in Europe.
How To Raise Funds Through 144A Bond Offering
If your company plans to issue a 144A bond offering to raise funding, you would need to write a disclosure document such as a private placement memorandum (PPM), under SEC rule 144A.
The terms of each bond issued will have the maturity date, interest rate, interest payment interval and other terms.
Since a PPM is technically a legal document, it is important that it protects you the entrepreneur by ensuring it satisfies the Security and Exchange Commission regulations.
It also helps you gain the trust of interested qualified institutional investors.
144A Bond Offering Process
To apply and qualify for local or international real estate project financing through the 144A bond program, you need to;
SEND PRELIMINARY BOND PACKAGE
When applying for financing through the 144A bond program, you need to prepare and send a preliminary bond package.
This includes a PPM document for review, and consideration.
MULTIPLE CONFERENCE CALLS HELD
Once your preliminary bond package has been received, multiple conference calls will be held as part of the due diligence process.
LENDING COMPANY ANALYSIS AND PRE-UNDERWRITES
Further due diligence will be carried out by the lending company and underwriting process commenced.
The application has to meet all the necessary 144A bond funding requirements.
LENDING COMPANY ISSUES A POSITIVE OPINION IN 1-2 WEEKS
If the financing application is approved by the lending company, a positive opinion will be issued within 1-2 weeks of receipt of the preliminary package.
LENDING COMPANY IS ENGAGED AND YOU PAY UNDERWRITING FEE
Upon issuance of a positive opinion, you will be required to engage the lending company.
Then you will be required to pay underwriting fees due on the loan amount requested.
Who Writes A Private Placement Memorandum (PPM) Document?
You can hire a securities lawyer, investment banking consultant, or a professional PPM writer to draft the document for your company.
Though costs of writing a PPM vary, it is important that you select and work with whoever fits within your budget.
Select who can write a proper PPM document targeted towards the 144A bond financing companies, you want to seek funding from.
Advantages Of 144A Bond Offering Financing
Lender funds 99% of total project cost (only 1% down payment needed)
No funding cap (loans from US$10 Million minimum No Maximum)
Non-recourse, no personal guarantee
No loss of project equity
Turn around time (closing timeline) is between 90-120 days
Flexible repayment terms offered
No asset verification
Best efforts basis
Funding available worldwide (International projects are funded)
No credit checks
Option to defer payments up to 12-24 months