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144A Bond Funding

144A bond is a privately placed debt security that is unregistered by the SEC and traded only between qualified institutional buyers 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 finance

144A bonds fall under SEC rule 144A issued in 1990 to facilitate the resale of unregistered securities, in a more liquid and efficient institutional resale market. Trading of these debt securities is limited only to between qualified institutional buyers and not individual investors, who cannot be qualified as institutional buyers under Rule 144A. 

Qualified institutional buyers, usually includes a vast majority of institutions that can be regarded as accredited investors under the SEC securities laws. Under the rule, the institutions 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. 

The assumption being, large institutions are clever enough to undertake due diligence without needing SEC help, contrary to individual investors, who most often do lack resources to verify claims from issuers, without help from the agency.

The rule also stipulates a two year holding period meaning a 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 such restricted securities possible. 144A bond issued by a qualified company investor has a maturity date that lasts for more than 10 years, when compared to a 144A note that usually 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 debt market. This enhanced transparency and made access to more information about trade and transactions in the institutional debt market, easily available to all financial market participants including professional investors, hence, resulting in a more efficient way of pricing and valuation of such securities. 

Most transactions involving securities of foreign companies are, however, not subject to SEC scrutiny, which exposes U.S. based institutions to the potential for fraudulent misrepresentations from foreign issuers. However, the rule also reduces the risks to the industry by allowing institutions to spread the risk from foreign-issued securities in private placements, making it easier for companies to issue private placements by essentially facilitating a secondary market among institutions for those securities. 

This makes regular initial public offerings (IPO) and other public issuance less attractive to institutional investors, leaving individual investors with fewer investment options. A 144A bond issue is for United States resident qualified institutional investors and is usually but not always settled through DTCC in the U.S. and Euroclear or Clearstream in Europe.  

How to issue a 144A bond 

If your company plans to issue a bond, then you would need to write a disclosure document such as a private placement memorandum (PPM), under 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, and also helps you gain the trust of interested qualified institutional investors.

What is the 144A Bond program process like?
1. Send preliminary bond package


2. Multiple conference calls held


3. Lending company analysis and pre-underwrites


4. If Lending Company issues a positive opinion in 1-2 weeks,


5. Lending company is engaged and you pay underwriting fee


6. Bond is then created


7. You get the funding


WHO CAN WRITE A PPM DOCUMENT FOR YOU?

Who can draft a PPM? You can hire a securities lawyer, investment banking consultant, or a professional PPM writer to draft the document for your company. 

Though some of them charge a lot of money, it is important that you select and work with whoever fits within your budget and can write a proper document targeted towards the group of investors, you want to seek funding from. 

A PPM is both legally important and strategic in terms of your company's business plan. When you want to attract investment as a startup, for instance, you should consider having a PPM whenever you visit venture capitalist forums or solicit investors over email. 

And while using standard elevator pitches and executive summaries are good, a professionally drafted PPM document will help speed up negotiations, make you look prepared and improve on the introduction and investment interest in your business. 

Not having a PPM though not an end to your funding request, can slow down negotiations and block investments making your business look unprofessional. 

Before writing a PPM, you need to know what your potential investors are looking for so that you can focus on creating an attractive document, specifically targeted at the group of institutional investors you are seeking funding from. A good private placement setup is all you need to get investments.

Advantages of a 144a bond finance

  • Lender funds 99% of total project cost (only 1% down payment needed) 
  • No funding cap ( loans from $1 Million USD to $500 Million USD or more) 
  • No personal guarantee required 
  • No loss of project equity 
  • Turn around time (closing timeline) is between 90-120 days 
  • Flexible repayment terms offered 
  • No asset verification process 
  • Funding available worldwide (International projects are funded) 
  • No need for credit verification 
  • Option to defer payments up to 12-24 months
  • Financing can be done in one lump sum 
  • Low underwriting fee 
  • No upfront costs to borrower other than third party reports 
  • Costs of third party reports reimbursed at the time of funding 
  • Up to 30 years amortized, 4.5% - 8.00% Interest rate only during construction 
  • No prepayment penalty   

Disadvantages of a 144A bond


Limited to institutions and not individual investors


PPM requirement and prohibitive third party costs and fees


All company assets used as collateral for the loan


What projects can be funded with a 144a bond?


real estate finance

Stabilized Real Estate


construction finance

Construction


rehab

Rehab


agriculture

Agriculture


oil & gas

Oil and Gas


mining

Mines


technology

Technology


energy

Energy


pharmaceuticals

Pharmaceutical


business acquisition

Major Business Acquisition/Expansion


medical practice

Medical Practices (Dental, Veterinary, Ophthalmology and all Surgery Practices)


DO YOU NEED FUNDING?

Do you have a business or institutional project whether United States based or Foreign that needs USD $1 million to USD $500 million or more in funding and you have a PPM? No need to worry, let us help you get funded. 

DISCLAIMER

Myhelpfund.com: is a referral and consulting services business. We are not Certified Financial Advisers, U. S. Securities Dealer, Stock Broker or Investment Adviser. We are not business consultants and acting in the capacity of a financial intermediary who provides advice to private individuals on or about business matters. .Please understand that the contemplated transaction(s) is strictly private and in no way relates to the United States securities act of 1933 **(THE”ACT”)* http://sblcfinancing.com/assets/sa33.pdf and does not involve the sale of registered securities. This transaction(s) are private and exempt from the act. Each investor associated in any way, directly or indirectly with myhelpfund.com as a potential funding resource must be an "Accredited Investor" as that term is used in federal and state securities laws. Myhelpfund.com provides a service through which clients and investors/lenders may identify each other but makes no actual or implied representations concerning the availability of any potential funding or funding resource. Myhelpfund.com neither effects nor attempts to affect any funding or business relationship between clients and any associated in any way, directly or indirectly investor or lender, and nothing contained in these services offering material should be construed as an offer to sell or the solicitation of an offer to purchase a security. Clients and Investors/Lenders associated in any way, directly or indirectly with myhelpfund.com are solely responsible for compliance of such federal, state, tax or local laws which may apply between them in any funding transaction and (clients) of myhelpfund.com are solely responsible to verify all funding contacts credentials by doing due diligence themselves. myhelpfund.com is not responsible for any problems or conflicts between clients of myhelpfund.com and any funding contacts. Myhelpfund.com does not provide legal, financial or tax advice of any kind. If you have any questions with respect to legal, financial or tax matters relevant to your interactions with myhelpfund.com funding contacts/clients, you should consult a professional adviser. Most early-stage businesses and many other growth-focused businesses fail, and if you invest in a business as a direct or indirect result of myhelpfund.com it is significantly more likely that you will lose all of your invested capital than you will see any return of capital or a profit. You should only invest in businesses that you can afford to lose without altering your standard of living. Myhelpfund.com receives compensation of fees charged on funding that has been accepted and received by the clients. All up front fees paid to our referral partners through their website or by other means are subject to their own terms and myhelpfund.com shall not be held liable for the same. All clients' information and funding transactions positive or negative are held in complete confidentiality and no information will ever be shared outside of our funding network or sold and no clients will ever be used as a reference or referral to any future potential funding seekers considering joining myhelpfund.com.