FAQs About 144-A Bond

Q: What about large Multi-Family properties / new construction loans. Say adult active and assisted living facilities, multi story with mixed use commercial office and retail on first floor and underground parking. Scalable projects for size/finishes depending on location/market. My current projects proposed and approved needing 100% financing or a co-investor (10%). Projects proposed are $40 million and $66 million in Orlando and Jacksonville Florida areas.

A: Yes, these would probably qualify. The main qualification is that Projects must be solid with viable exit strategy and Principals must be proven and experienced.

Q: You noted examples of fees in the flyer that were very reasonable, however the 5-8 points on the bond is a great deal more than the fees shown and I must assume are additional, correct?.

A: Yes, that is correct. The fee’s indicated are non-refundable and are due once the bonding company has approved the project. In addition, there are the points which are paid at time of funding.

Q: Who do the points go to?

A: They are paid to the 5th Avenue Acquisitions & Venture Capitalists partner that is working the deal at the bonding company.

Q: Is the bond the funding vehicle or is the bond an instrument that then guarantees a loan from elsewhere, please explain?

A: The bond is the funding vehicle.

Q: I am a Business Consultant and work with clients whom I have a client agreement with and need to be central to the project. How will I get compensated and will I be in the loop with the bonding company?

A: If you have an agreement with the client, it is best that you are then funded by the client. Once approved and the client has committed to having the bond funded, it will be necessary for your client to be working directly with the bonding company, however, you can be on the calls and assist your client in the transaction.

Q: If a client has to show POF for fees, then fee amounts have to be advised to us and a full term sheet of some type needs to be provided in advance of any agreement by client(s) to proceed. Will you please send me an example of same for my use with this and other clients of potential?
 
A: How the Bond Funding works:
 
The Fee amounts are calculated after the bond firm sees the package.  No term sheets are provided since client and bond firm work together to create the terms of the bond after fee is paid.  The smaller the project the more likely it is to be fund by one investor. If the bonding company doesn’t raise enough the client can choose to accept the amount raised and stop or they can choose to accept the amount raised and have 5th Avenue Acquisitions & Venture Capitalists keep trying or they can refuse it completely and terminate the process.
 
Q: Please advise WHO is the bond company(s) that would consider/be considered for provision of the 144?
 
A: The Bonding Company has been providing the 144A bond program for over 20 years and have been very successful with the program. The source will not be provided until 
after we get into the package. If the bond firm says they like the deal an NDNCA is signed and the source will be revealed.  If we get to the point where both sides want to go forward the bond company will issue a contract for their services. Before any money changes hands if the client wants, the bond company will give him a reference to call. They are very sensitive about their client base and many of their clients won’t even agree to be references, but they will provide one at that time.
 
Q: How did the 144A Bond Program come about?
 
A: Rule 144A. Securities Act of 1933, as amended (the "Securities Act") provides a safe harbor from the registration requirements of the Securities Act of 1933 for certain private resales of minimum $500,000 units of restricted securities to QIBs (qualified institutional buyers), which generally are large institutional investors that own at least $100 million in investable assets. When a broker or dealer is selling securities in reliance on Rule 144A, it is subject to the condition that it may not make offers to persons other than those who have presented certain documents outlined by the SEC, such as audited financial statements, to establish that the buyer is a QIB.
 
Since its adoption, Rule 144A has greatly increased the liquidity of the securities affected. This is because the institutions can now trade these formerly restricted securities amongst themselves, thereby eliminating the restrictions that are imposed to protect the public. Rule 144A was implemented in order to induce foreign companies to sell securities in the US capital markets. For firms registered with the SEC or a foreign company providing information to the SEC, financial statements need not be provided to buyers. Rule 144A has become the principal safe harbor on which non-U.S. companies rely when accessing the U.S. capital markets.  Since 1990, the Nasdaq Stock Market offers a compliance review process which grants Depository Trust & Clearing Corporation (DTCC) book-entry access to 144A securities.  Nasdaq launched an Electronic Trading Platform for 144A securities called PORTAL.  Rule 144A should not be confused with rule 144, which permits public (as opposed to private) unregistered resales of restricted and controlled securities (within certain limits.)

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***ATTENTION BROKERS***
 
If you are a broker with projects whereby you are having challenges establishing financing and would like our help, please contact us for details on our private money co-broker and referral programs. Understand that we will then / also deal directly with with the Principle / Developer, but we will honor your interest & commission in the project. We do not tolerate greed and will not work with a chain of brokers.  If you initiate a project with us and it is approved, you will get paid accordingly… if there are other brokers involved in the transaction, you will be responsible for their fees.