CORPORATE BOND FUNDING:
Corporate bond funding is for clients with substantial assets that are available to be used as collateral. Funding by the creation of corporate bonds can provide an attractive option. This works particularly well for clients with in-ground assets i.e. gold, silver, copper, iron ore, granite, oil and gas, which are valuable assets against which banks typically won’t lend.
For in-ground assets, geology reports which are 43-101 or JORC compliant prepared by recognized geological firms and demonstrating proven or measured reserves are essential, or in the case of power generation or similar projects, power >purchase agreements< from purchasers with strong credit ratings are necessary.
Debt capital obligations like bonds are created for the client using it’s assets as collateral. The bond manager/underwriter then has the bonds rated by S&P, Moody’s or Fitch then registered and sold. A bank serves as the trustee and creates a sinking fund from the business profits to pay the interest and retire the bonds.
There are pre-issuance costs such as the rating agency fees, legal expenses and trustees fees which the client must pay which can exceed $400K. A tiny cost when you consider a bond offering can exceed $100M or even $1 billion. The overall fees at closing typically run from 5% to 8%.
The underwriter sells the bonds to several institutional investors who buy large amounts of bonds at a time. This isn’t nickle & dime PPM share sales to hundreds of mom & pop investors. The time required to complete a bond financing is generally 3 to 4 months.
EQUITY PROJECT FINANCE:
A joint-venture (J/V) funder provides 100% equity funding for the project and receives 50% passive interest in the project. The client has the right to repurchase the J/V interest after stabilization at then fair market VALUE. This funding option is not available to publicly-traded companies.
The funding source for the 2 options above also does the FORWARD-SALE FUNDING already mentioned in this blogfeed previously. Do not ask us to speculate about SOP’s of any funder on this blogfeed for details not already disclosed and prior to being a client.
NOTE: Any equity funder that has provisions for DEFERRED and PARTICIPATING clauses in their term sheets can see both their ownership and revenues climb substantially if the clauses ever become “triggered”. Further details on these provisions have also been mentioned on the blogfeed previously.
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GLOBALCROSSROADSCAPITAL.COM is a US Vet-owned IR media communications firm and is not a funder, lender, investor, buyer, seller, free advisor, or broker-dealer. If you have a current need and have eligibility for any of the programs above you must be a client to pursue them. First step is to proceed to the CONTACT page at the top of this blogfeed or click on the orange url just above.
Finance topics, trends, & specific term sheets 