1. Tax Exempt Bond Financing: Basics and Beyond
Utilizing Tax Exempt Bonds for Affordable Housing
Paul Davis
Warren Wenzloff
2019 Applegate & Thorne-Thomsen Developer Boot Camp, April 1, 2019

2. BOND BASICS What are Tax Exempt Bonds?
Under section 146 of the IRC, each state is allocated tax exempt private activity bond volume equal to the greater of (for 20129) (a) $316 million or (b) $105 per resident. These limits increase annually based on inflation indexes
Private activity bonds are debt obligations that serve a designated public purpose for facilities that are privately owned
Types of private activity bonds include multifamily affordable housing revenue bonds, single family revenue bonds, industrial development bonds
Each state gets to allocate its volume cap as it deems appropriate among the various types
Interest is exempt from federal taxation and state taxation (generally)
*There are also 501©(3) bonds—these can’t be used with LIHTC—we will discuss only private activity bonds (bonds issued under volume cap)

3. Why Use TE Bonds?
The trend among states has been to allocate more private activity bonds (PAB) to multifamily affordable housing (as opposed to, for example, industrial development bonds)
Why? Because it triggers the allocation of 4% LIHTC, which further subsidizes the development of affordable housing. No other use of PAB triggers the use of additional federal subsidy, so it is attractive for both states and developers as a tool for developing housing, creating jobs, etc.
Carryforward: Once a state’s PAB has been allocated, if not used in the year of allocation, the issuers can elect (through a filing with the IRS) to “carryforward” the volume cap for 3 years for use by other eligible projects of the same type
States hate to waste volume cap because of the attached federal subsidy, which means that if not used, the loss to the state is much more than just the loss of the volume cap in terms of funding for affordable housing

4. Generally Two Categories of Deals using TE Bonds and 4% LIHTC
100% Affordable projects
Bond set asides only require 20/50 or 40/60, but under Section 42, the borrower affirmatively obligates itself to 100% at 60% or less (or a blend of 30/40/50/60, etc., ignoring income averaging for the sake of this discussion)
Developer is often relying on developer fees rather than cash flow to make these deals work
Maximizes the use of 4% LIHTC

5. Mixed use or Mixed Income Projects
Urban projects involving a mix of affordable and market rate rental, for sale, retail.
Sometimes referred to as 80/20 deals, where 80% of the units are market rate and only 20% are affordable (the 20/50 set aside)
The 4% LIHTC is only available on the affordable units, so the value of the LIHTC in terms of a source is much less, however, the project relies on market rents and appreciation of same—greater cash flow and back end opportunities
Tax credit investor may be wary of market rate units

6. Advantages of TE Bond Structures:
Lower interest costs, which translate to a larger loan for the developer, greater cash flow or lower rents
Can cover up to 60% of the cost of development
Noncompetitive process for receiving an allocation of 4% LIHTC, which can cover up to another 35% of the development costs (or more if in a DDA)
The 9% program is oversubscribed. Estimates are at a 5:1 ratio, so while the 9% credit is a more robust subsidy, the automatic receipt of credits when using TE Bonds provides a useful alternative to take advantage of the federal credit
Of note: The 9% and 4% lihtc programs account for an almost equal amount of affordable units each year
The minimum set aside is the same as 9% LIHTC
No carryover requirements

7. Disadvantages of TE Bond Structures
Financing fees tend to be high
Need to be wary of good cost/bad cost analysis
Some state agencies have required deadlines for closing following the date of approval of the bond issuance (California)

8. Who Issues TE Bonds?
States, local governmental entities or agencies that have “volume cap”
Cities (City of Chicago, for example)
Townships
HFA’s (IHDA, for example)
Counties
County Housing Authorities
Not as much now, but sometimes had one governmental entity “cede” volume cap to another, so developers can aggregate enough volume cap/bonds to do their deal

9. How Do I Get Bonds? Assembling the Team:
Later in our outline we will discuss the most common executions for TE Bond deals, but regardless of the execution, to get started, you need a closing team with some or all of the following members:
Issuer (obviously)
Underwriter (public offering)
Equity Provider
Bond Counsel
Credit Enhancer
Accountant?
Bond Purchaser (private placement)

10. Step 1: Application Process and Basic Section 42 Requirements
TE Bond application submitted to Issuing Authority
In many instances, the TE Bond application is the same as the LIHTC application.
Mandatory Section 42 requirements for your project:
1. Must meet the requirements of the QAP
2. Must meet the Financial Feasibility requirements:
IRC Section 42(m)(1)(d): the Project satisfies the requirements under the qualified allocation plan for the allocating agency
IRC Section 42(m)(2)(d): the amount of the low income housing tax credits expected to be available to the Project does not exceed the amount of low income housing tax credits necessary for the financial feasibility of the Project and its viability as a qualified low income housing project throughout the credit period

11. Step 2: Public Notice and Inducement
Public notice of the project: The TEFRA (The Tax Equity and Fiscal Responsibility Act) hearing must be held
mandated by the IRS to provide a reasonable opportunity for interested individuals to express their views on the issuance of bonds and the nature of the improvements and projects for which the bond funds will be allocated
Inducement Resolution Passed at the Issuer
The resolution provides for the “allocation” of the PAB
Equity providers want to see this to confirm that the bonds are private activity bonds subject to volume cap, otherwise, the project is not eligible for the 4% LIHTC
(Note: at the time of issuance of the bonds, bond counsel prepares IRS Form 8038, which also recites that the bonds are private activity bonds. Equity providers typically want to see both)
The inducement resolution also constitutes an “official” action by the issuing agency , which is an important benchmark. Costs that are incurred up to 60 days in advance of the inducement resolution can be paid for with bond proceeds
Other timing issues with inducement; ex. acquisition

12. Step 3: Qualifying for Tax Exempt Status
There are a host of requirements that must be met to ensure that the bonds qualify for tax exempt status (and retain that status). Here are a few of the major ones:
Good Cost/Bad Cost Analysis
50% Test
Qualified Period

13. The “Good Cost/Bad Cost Analysis”
95% of the TE Bond proceeds must be used to provide a qualified residential rental project:
Good costs include land and depreciable costs (and land is limited to 25%)
Bad costs include: costs of issuance (underwriter fees, issuer fees, etc.), commercial space, loan fees amortized over the permanent loan period, intangible assets, commercial space*
No more than 2% of bond proceeds can be used for costs of issuance
*How do you pay for “bad costs”? Equity or taxable “tails” are used

14. 50% TEST(IRC Section 42(h)(4)(B):
To be eligible for the full value of the LIHTC, the developer must finance at least 50% of the aggregate basis (depreciable basis + land cost + building cost) with the TE Bonds (Section 142(d)) and keep the bonds outstanding until the placement in service (PIS) of the project
PIS: New construction= certificate of occupancy
PIS: Rehab: more flexibility—uses the same test as with 9% LIHTC
Bonds going to good costs > 50% Aggregate Basis
Reminder: less than 25% can go to acquisition costs (147(c)) and no more than 2% to issuance costs (underwriter’s spread, counsel fees, rating agency fees, trustee fees, printing, publication costs)
 PLR : Investment earnings prior to PIS are part of bond proceeds

15. When do you calculate the 50%? Plan ahead for basis changes
Timing of calculation—end of first taxable year of credit period is when eligible basis determined. PLR
Potential hiccups: Cost overruns incurred after the initial closing, or other expenditures not contemplated in the initial calculation of "aggregate basis", will cause the ultimate calculation of aggregate basis to be greater than initially contemplated. As aggregate basis increases, the amount of bond financing necessary for meeting the 50% test also increases, with the resulting possibility that the amount of the bond financing will not be sufficient to meet the 50% test, if such test is applied at a point in time following construction completion. As a result, developers try to size the bonds at 53% or more at initial closing to provide some cushion. Another protection: reduce developer fee at completion

16. How Long/When Do The TE Bonds Have To Be Outstanding:
Construction loan only (i.e., short term TE Bonds)—must survive to PIS: PLR
Permanent loan only (long term bonds)—must be in place by end of first credit year
part of entire financing package
bond inducement resolution passed prior to initial closing
  Related note, sort of: Section 147(b) mandates that the average maturity of the bonds must not exceed 120% of the average reasonably expected useful life of the project

17. Qualified Period
The qualified project period (i.e., the period during which the project needs to meet the rental restrictions for bond purposes) begins on the date 10 percent of a project’s units are occupied (or, if later, the date on which the bonds are issued), and ends on the later of (a) 15 years after the date 50 percent of the project units are first occupied; (2) the first date on which there are no outstanding tax-exempt private activity bonds for the project; or (3) the termination date of any Section 8 rental assistance payments to the project
Issues: on resyndications of project-based section 8 deals previously financed with TE Bonds, the old TE Bond regulatory agreement remains in place, which could contain restrictions that exceed the minimum set aside as agreed upon the prior owner

18. Redemption Assumption
If redeeming existing bonds, pay attention to redemption notice periods and other requirements
If assuming regulatory agreement (qualified project period still in effect), pay attention to assumption requirements

19. STRUCTURING/PLANNING CONSIDERATIONS
Locking the Credit Rate
Bridge Bonds
Seller Notes
Anti-churning Rules and Related Party Debt Issues

20. Locking The Credit Rate:
The 4% credit rate is not “locked” as with the 9% rate. For example, the credit rate for the month of March, 2019, was 3.27%
You have a choice of when to lock in the credit rate: at date of issuance of the bonds (must file this election within 5 days after month of issuance) or
At the time of placement in service of the project

21. Bridge Bonds
Occasionally the transaction will not meet the 50% test unless the amount of TE Bonds is increased (remember, the TE Bonds just need to remain in place through PIS). In addition, a deferral of the pay-in of LIHTC equity can result in an increased price per credit from the equity investor. Finally, the Community Reinvestment Act (CRA) may make the use of a bridge bond or loan attractive to certain banks. As a result, many TE Bond transactions take advantage of TE bridge loan financing
Bridge Bonds: Additional (sometimes referred to as “series B” bonds) are issued, which bridge the equity contributions of the LIHTC investor. The bonds are then repaid when those contributions come in at a date following completion, such as 3 months of 95% occupancy/stabilization.
If using an FHA loan (as discussed later), be aware of potential limitations on the collateral pledged as security for bridge bonds

22. Seller Tax Exempt Notes:
The issuer, in addition to the other tax-exempt bonds it is issuing, may also issue tax-exempt subordinate seller tax exempt bonds (or a tax-exempt seller note), that functions just like seller financing. Discuss with issuer early in process. Why use a Seller TE Bond or Note?
The advantage are:
It closes a gap in financing/reduces the need for cash at closing. Often used in large transactions where the acquisition price is high, acquisition credits are in play, and the seller is related to the borrower (think RAD deals where the PHA sells the property to a new borrower in which the PHA has an indirect interest)
The Seller TE Bond/Note is delivered to the seller as full or partial payment of the purchase price without actual cash having to move
The bonds count as tax-exempt debt for meeting the 50% test (very useful)
If the seller is a for-profit entity, it may appreciate the tax-exempt interest payments

23. ISSUES TO BE AWARE OF WHEN RELATED PARTIES ARE INVOLVED OR SELLER NOTES ARE PRESENT
Seller take-back notes typically only arise when the seller, or a principal of the seller, is selling the project to a new limited partnership or LLC in which the seller or the principal of the seller has an interest These situations are often seen on larger mod rehab deals where the purchase price requires seller financing of some sort (aka, the seller take-back note) Deals of this type raise some unique issues

24. Anti-churning rules
The hurdle: To obtain acquisition credits, a Building must be acquired by “purchase” and not previously placed in service by a person related to the buyer/borrower (in other words, don’t churn the deal by selling it to yourself to generate acquisition LIHTC)
The test: The property seller must own less than a 50% interest in either the selling entity or the buying entity. Also a person related to the Partnership has not previously placed the property in service, even if they are not the current owner. Note: cannot resyndicate with existing limited partner
If you fail the test, you are not eligible for acquisition LIHTC

25. How do you determine whether you have an anti-churning issue?
Look at Entire Economic Interest of the common principals in the Seller and the Borrower
Must look at the highest percentage share the seller has in both the selling and buying entities (check their LPA’s and ancillary service/fee agreements) for both operating and sale/refinance situations, fees, etc.
 Fees - Must include fees in evaluating 50%, unless there is a high certainty that such a fee would not be reclassified as a partnership interest. Developer Fees are generally not considered part of the 50%. A reasonable partnership management fee would be OK as well. Incentive Management Fees are considered part of the 50%
Note: Properly documented Seller take-back notes would NOT violate this

26. OTHER RELATED PARTY DEBT ISSUES
Transactions utilizing 4% LIHTC and TE Bonds often cause the capital account of the equity investor to go negative due to the comparatively low equity contribution amount but high allocation of losses due to depreciation, etc. When an equity investor’s account goes negative, absent “minimum gain”, there can be a reallocation of LIHTC from the equity investor to the general partner, which results in a tax credit guaranty issue As a result, it is important to determine whether the equity investor’s capital account remains positive throughout the compliance period, and that is often a function of whether there is sufficient minimum gain created by certain types of subordinate loans

27. How to determine whether you need to address related party rule issues?
Verify whether the investor considers the seller take-back note to be “partnership nonrecourse debt” or “partner nonrecourse debt”. If the investor is treating the debt as “partner recourse debt”, and it confirms that there is no reallocation of credits due to a negative capital account/lack of good minimum gain, the analysis can stop there
If the investor needs it to be treated as “partnership nonrecourse debt”, which generates good “minimum gain”, then in addition to evaluating the structure of the partnership for anti-churning purposes, you need to evaluate the partnership structure to make sure the debt in fact qualifies as “partnership nonrecourse debt”

28. Debt will be treated as “unrelated” and therefore “partnership nonrecourse debt” if (i) the lender (in this case, the seller) owns less than 80% of the general partner of the borrower and (ii) the general partner of the borrower is a corporation or an LLC that elects to be treated as a corporation.  (Referred to as 79/21 structure)
If either of these conditions are not satisfied then the debt will be considered “partner nonrecourse debt” and will not produce the good third-party minimum gain that allows capital accounts to go negative and still take losses, and therefore LIHTC.
We already solved for the 50% test for Anti-churning purposes, so why is this an issue?
The general partner needs to file an election to be treated as a corporation, yet many general partners are formed as LLC’s. To avoid the corporation or LLC being taxed, it also files a Subchapter S election that allows it to be a pass- through entity for income tax purposes.  However, the tax code only permits individuals and corporations and certain trusts to be members of a Subchapter S entity.  The code does not permit limited partnership, for example, or LLCs to be members of a Subchapter S entity.  Be aware of this when structuring your general partner

29. COMMON TE BOND EXECUTIONS
In the past, we more commonly saw “low-floater” bond transaction, with weekly variable rate bonds coupled with an interest swap or cap Today we more frequently see short term cash-collateralized TE Bonds or fixed rate private placement TEB Bonds. A slight variation to the fixed rate private placement is the private placement tax-exempt loan structure Following are some of the structures commonly used today…

30. SHORT TERM CASH COLLATERALIZED BONDS
Issuer issues short-term TE Bonds that are of sufficient amount to meet the 50% test
The bonds typically have a maturity date that is 6 months to a full year after the expected construction completion date (Remember, the bonds have to remain outstanding through PIS, so allow time for construction delays)
Under the bond indenture, several funds are created:
Project Fund: all of the bond proceeds get deposited into this fund, and it is from this fund that money is drawn to pay for construction (I am abbreviating the process here!)
Collateral Fund: funds are deposited by [see next slide in a moment] in the same amount, and as a precondition to release of, the funds drawn from the Project Fund

31. The trustee under the Trust Indenture monitors this (and it receives a fee for doing so), however, it relies heavily on the source of the cash collateral for organizing and approving the draws. The trustee does not independently verify construction costs
So, as each $1 of bond proceeds gets drawn and used to pay construction costs, $1 of funds must be deposited, often called “replacement proceeds”
If the project fails, the trustee uses the $ in the collateral fund to redeem the bonds/pay the bondholders off

32. In addition to the funds deposited into the Collateral Fund (which is only enough to cover the principal amount of the bonds), the interest that will accrue on the bonds through maturity (remember, these are short term bonds) is deposited into an interest reserve account, therefore securing repayment of all interest on the bonds. The principal AND interest of the bonds are fully cash-collateralized
Upon PIS, and at the time of maturity, the bonds are redeemed using the $ in the Collateral Fund (and any excess interest in the interest reserve goes back to the borrower)

33. Major advantage for bond ratings because the bonds are always 100% cash-collateralized. Typically results in a AA+ rating
Other advantages:
elimination of some administrative fees after the bonds are redeemed (some issuers still charge a small fee due to the need to monitor/report on the project)
Costs of issuance can be lower
If you can have a short bond maturity (13 months or less) may realize an even lower interest rate
If an optional redemption provision is incorporated into the bonds, where bonds can be called earlier than the stated maturity, can save on capitalized interest (goes back to borrower)

34. WHO PROVIDES THE CASH FOR THE COLLATERAL FUND?
A few typical sources:
1. FHA-INSURED 223(F) OR 22(D)(4) LOANS:
A very common source of the cash collateral is the FHA-insured loan product. Aside from the bond documents, the FHA loan is documented very similarly to the typical (d)(4) or 223(f) loan. The FHA loan remains in place for the remainder of its customary term
Pre-close on the bonds on Tuesday, record loan documents on Wednesday, and close at HUD on Thursday and fund Thursday afternoon or, more likely, on Friday

35. Advantages of the FHA Cash Collateralized TE Bond Execution:
Long term (35 or 40 years) amortizing debt
Lower interest rates on the bonds due to the full collateralization
Nonrecourse debt following conversion
Some/all of the interest expense can be offset by investment of the collateral funds (there are some restrictions on investments, but typical investment options might include US Treasuries or SLGS (state and local government securities). No negative arbitrage?

36. Disadvantages of FHA Cash Collateralized TE Bond Execution:
HUD processing time can add time, and as a result, expense
The closing process is not always as smooth—it depends on the FHA lender and the HUD office
You are incurring interest on both the TE Bonds and the taxable (FHA) loan
FHA has restrictions on the securitization of bridge bonds, bridge loans and seller take-back notes (general requirement is that such loans cannot be secured by a mortgage, may need to be surplus cash loans

37. 2. FREDDIE MAC TAX EXEMPT LOAN*:
Cash loan, secured by the property, that provides collateral for tax-exempt bonds with 4% LIHTC
Bonds paid off when units placed in service. Cash loan remains in place Immediate executions
Fixed- and Variable rate executions available
Min. 1.15x DCR
Max. 90% LTV
Terms up to 18 years
Max. amortization of 35 years
*(Fannie Mae has a similar program)

38. OTHER MEANS OF CREDIT ENHANCEMENT:
Irrevocable Standby Letter of Credit
Obtain a LOC from a credit-worthy bank, which is delivered to the Trustee. At the time of redemption of the bonds, the LOC is drawn upon to redeem the bonds, and the borrower repays the LOC bank.

39. TAX EXEMPT BOND AND TAX EXEMPT LOAN PRIVATE PLACEMENTS
Bonds are not sold through a public offering but rather though a private offering
Major banks are big buyers of tax exempt bonds and loans due to the Community Reinvestment Act (CRA) requirements imposed upon them
CRA requires banks to invest a certain amount of their funds in public benefit projects in the markets where they have a presence
As a result, banks started to buy TE Bonds without credit enhancement (no cash collateral or other security beyond a mortgage and other customary loan documents). Often these were done as “draw down” bonds, where bond proceeds are drawn only as needed over the construction period (saves interest costs)

40. Advantages of Private Placement:
No need for credit enhancement (such as FHA)
No credit enhancement means less participants
Less participants + lack of credit enhancement=faster, more flexible closings
Can use draw down funding if bank is amenable
A lower variable rate may be permitted during construction
But can lock in the fixed permanent interest rate at initial closing
Avoids some FHA issues: collateralization of bridge bonds/bridge loans/seller take-back notes, Davis Bacon wage requirements
Which means that there could be a loan paydown at conversion from deferred equity (FHA loans do not reduce at conversion)

41. Disadvantages of Private Placement:
May be a 35 year amortization, but likely has a mandatory 16 to 18 year maturity (FHA is 35 or 40, depending on the program)
FHA loans are nonrecourse during construction as well as permanent phase
FHA loans do not right-size the debt at time of stabilization, and private placement loans often do
Rates are usually higher than, for example, FHA loan rates

42. How do private placements work?
Traditional Credit Enhanced Bond Structure
UNDERWRITER
ISSUER (CONDUIT)
LOAN AGREEMENT 1 2 $ $
INDENTURE $ 3
INVESTORS 5
TRUSTEE
BORROWER $ 4 $
BONDS
MORTGAGE NOTE
CREDIT ENHANCEMENT
(e.g., FHA/GHNMA, Fannie Mae, Freddie Mac)

43. Bank Private Placement Bond Structure
UNDERWRITER
ISSUER (CONDUIT)
LOAN AGREEMENT 1 2 $ $
INDENTURE $ 3
INVESTORS 5
TRUSTEE
BORROWER $ 4 $
BONDS
MORTGAGE NOTE
CREDIT ENHANCEMENT
(e.g., FHA/GHNMA, Fannie Mae, Freddie Mac)

44. TAX EXEMPT LOANS
In 2008, bank regulators started reclassifying bond purchases as “investment” activity , rather than “lending” activity (as if the bank was buying a security)
As a result, to achieve “lending treatment” for CRA purposes (which is more favorable to the banks), many of the banks (led by Citibank, with the advice and counsel of Wade Norris and his colleagues) developed tax exempt loan (instead of bond) programs. Freddie Mac did as well…

45. Rather than purchasing bonds, the Bank (or “Funding Lender”) makes a loan (the “Funding Loan”) directly to the Issuer (the “Governmental Lender”)
The Governmental Lender then loans the proceeds of the Funding Loan directly to the Borrower (the “Borrower Loan”). This is basically a tax-exempt loan to a governmental lender, which loans the proceeds to a project borrower

46. FUNDING LOAN AGREEMENT BORROWER LOAN AGREEMENT GOVERNMENTAL LENDER
Rather than purchasing bonds, the Bank (or “Funding Lender”) makes a loan (the “Funding Loan”) directly to the Issuer (the “Governmental Lender”)
The Governmental Lender then loans the proceeds of the Funding Loan directly to the Borrower (the “Borrower Loan”). This is basically a tax-exempt loan to a governmental lender, which loans the proceeds to a project borrower
FUNDING LOAN AGREEMENT
BORROWER
LOAN AGREEMENT
GOVERNMENTAL LENDER
GOVERNMENTAL LENDER NOTE
BORROWER NOTE
INVESTORS
TRUSTEE
BORROWER

47. The tax-exempt loan structure substitutes a “Funding Loan Agreement” evidencing that Funding Loan for the Indenture under which the Issuer would issue its bond under the bond placement structure
Under both structures, the proceeds received from the Bank are loaned by the Issuer to the Borrower under a loan agreement between the Issuer and the Borrower
The payments by the Borrower under the Borrower Loan are pledged and, together with the mortgage on the Project, provide the sole source of security for repayment of the Issuer’s obligations under the Governmental Lender Note
The Governmental Lender Note under the tax-exempt loan structure, like the bond under a bond structure, is a debt of a state or political subdivision and a tax-exempt “private activity bond” under Section 142(d) of the Internal Revenue Code. In effect, the volume allocators appear to be treating the two alternative financing structures with banks as fungible for private activity bond volume and 4% LIHTC allocation purposes

48. Freddie Mac Tax Exempt Loans (TELs)
A tax exempt loan program that is an alternative to bank private placements was developed by Freddie Mac
Freddie Mac’s Tax Exempt Loan or “TEL” structure has many of the same features and terms as bank private placements. This structure also offers very low fixed perm rates and is potentially available in a broader range of markets (not just CRA driven) Fixed, floating and float-to-fixed options
Immediate funding, or a forward commitment from a Freddie Mac Targeted Affordable Lender and Freddie Mac to acquire the permanent phase component of the tax-exempt loan at an agreed upon fixed rate at Conversion, with a bank taking the risk on the tax exempt loan during the pre-Conversion phase
Terms are comparable to bank private placements: Loan terms are 16 years (mod rehab) up to 18 years (new cons/sub rehab), a 35-year loan amortization, 1.15 debt service coverage and a 85% - 90% maximum LTV

49. Some commonly USED DEFINED terms
Bond Counsel: Attorney representing the bond issuer and bondholders. The attorney provides an opinion that the interest on the bonds is exempt from federal taxation. Responsible for the bond inducement resolution, bonds, the bond indenture, the financing agreement, the regulatory agreement and the tax opinion
Bond Issuer: Governmental or Non-Profit entity responsible for issuing the bonds
Credit Enhancer: For fee, guarantees that the bondholders will receive scheduled bond payments
Inducement Resolution: A resolution passed by the bond issuer communicating the intent to issue bonds for a specific activity

50. Official Statement: The marketing prospectus used by underwriters to sell the bonds. The official statement summarizes the terms of the bonds and other information relevant to the investment decision
Rating Agency: Agencies that determine or “rate” the investment risk of the bonds. Examples include Standard & Poor’s and Moody’s Investor Services
Regulatory Agreement: An agreement entered into between the borrower, the bond issuer and the trustee specifying the income rent and income restrictions a project owner must comply with for the bonds to retain their tax-exempt status
TEFRA Hearing: The bond issuer’s public notice, public hearing and approval by elected officials of a bond issuance
Trust Indenture: An agreement between the bond issuer and the trustee containing the terms and procedures for payment of the bonds.
Underwriter: An investment bank that underwrites and markets the bonds to investors