Let’s discuss how tax exempt financing works.

Private Placement versus Revenue Bonds

Many nonprofits have had some experience with the retail distribution of tax-exempt revenue bonds; fewer are familiar with the private placement of a tax-exempt revenue note.

Private placement is less expensive:

• Your issuance costs are less – often by a much as half. (Should you ever prepay, refinance, or consolidate your financing, the value of this reduction in cost will become even greater.)
• You won’t need a debt service reserve fund, making your financing 10 percent smaller.
• You can select a true draw approach, reducing interest expense during the construction period – often by 25 percent or more.

Private placement is faster and easier:

• You should expect a lending commitment and rate confirmation in about four weeks, and closing within a total of about eight to twelve weeks.
• We require a minimum of time and effort from you. (Sorry – no rating or underwriting meetings, no feasibility study, no official statement, and no annual disclosure update)

Private placement is more flexible:

• Your covenants are typically briefer, and less burdensome.
• After closing, you would deal with a local or regional lender, not a trustee.
• In most cases you would have the right to prepay, in full or in part, on any payment date, without penalty.

MHC is the only firm which specializes in privately placing the tax-exempt revenue notes
of Midwestern nonprofit corporations with commercial banks.