3Bank Loans vs. Bond Issues Banks that buy Non-Bank-Qualified Debt lose federal income tax interest cost deductibility for the interest expense on an amount of deposits corresponding to the amount of non-bank qualified debt purchased.For Bank-Qualified Debt, banks lose interest cost deductibility on an amount of deposits equal to 20% of the amount of the tax-exempt obligations owned.
4Bank Loans vs. Bond Issues Advantages of Bank Loans to Tax-Exempt BorrowersLower Upfront CostsAdministrative EaseNo SEC Disclosure compliance requirementsInterest rates may be higher or lower depending on term, structure and market conditions
5Bank Loans vs. Bond Issues Advantages of Bond Issues to Tax-Exempt BorrowersOften able to obtain longer term fixed interest ratesLonger term interest rates are often lower than bank loan rates
6Bank Loans vs. Bond Issues When Banks are most Competitive when compared to Bond IssuesWhen Bank-Qualified Debt is being offered.In climbing interest rate environments. Generally, public market rates go up more quickly than bank rates.When banks are willing to commit to fixed interest rates of 10 years or longer.When banks are willing to cap variable interest rate exposure without substantial cost to borrower.