Energy and Financial Consulting
A Certificate of Participation (COP) is defined as a type of financing in which an individual buys a share of the lease revenues of an agreement made by a municipality or governmental entity, rather than a bond being secured by those revenues. The municipality usually uses the lease proceeds to construct a facility or acquire equipment that is leased to them, releasing the government unit from restrictions on the amount of debt that they can incur.
Due to the continuing market conditions and the loss of numerous Private Placement investors, we at Energy and Financial Consulting have an innovative solution to finance many of the larger projects historically funded by institutions in the private placement market.
Limited Public Offering
Currently, the Municipal Bond Market had regained most of its stability, and municipal bonds are again selling at historic levels and competitive rates. Unfortunately the Municipal Private Placement Market is still in turmoil due primarily to the ongoing economic events.
The traditional municipal market is funded primarily by mutual funds, insurance companies, pension funds, and individuals. Our strategy is to utilize this market to fund projects that were historically funded by large commercial banks and other private placement purchasers who are no longer as active in the market.
We have come up with an efficient process to utilize this market. Below are what we believe to be the major differences in the process from a tradition Lease Purchase Municipal financing.
1. EnFin can have a very detailed proposal prepared for the municipality once the details of the anticipated transaction are outlined. We cannot provide a fixed rate commitment within the initial process. Rather, a projected rate will be provided which is usually very close to the actual rate and is presented as a no greater than rate. The actual rate will be determined on the day the COP is offered to the marketplace.
2. The process requires a bond counsel to be involved in the documentation process from day one. This is not to say that we cannot start with standard documents, but as we require a Red Book Bond Opinion, they will be involved in the process to assure all of the required needs are met.
3. If the client is bond rated, we will have to have that rating assigned to our transaction. This is not a complicated process, and the placement agent will be responsible for the need.
4. A disclosure document (Official Statement) required by SEC will be prepared by Bond Counsel. Most clients have the bulk of the required information readily available and should be very easy to obtain.
There are significant benefits to this process.
1. By accessing the financial markets, which have historically been the lowest cost of funds available, we can provide the client with very competitive rates. EnFin has the ability to offer serial and term certificates priced to shorter term maturities, and when blended provide an overall lower cost of funds for the transaction.
2. The capital markets can provide a virtually endless supply of funds at competitive rates. The minimum transaction of interest appears to be around $2,000,000 at this time.