Rule 144-A

144-A Services

Private Placement Memorandum has a 144-A offering memorandum template that can be used for a wide variety of private placement services, including bond offerings, CUSIP and ISIN numbers and 144A assistance.

Rule 144A, adopted pursuant to the U.S. Securities Act of 1933, as amended (the “Securities Act”) provides a safe harbor from the registration requirements of the Securities Act of 1933 for certain private resales of restricted securities to Qualified Institutional Buyers (QIBs), which generally are large institutional investors with over $100 million in investable assets. When a broker or dealer is selling securities such as a stock or debenture, in reliance on Rule 144a, it is subject to the condition that it may not make offers to individuals other than those it reasonably believes to be Qualified Institutional Buyers.

Since 1990, the Nasdaq Stock Market offers a compliance review process which grants Depository Trust & Clearing Corporation (DTCC) book-entry access to 144A securities. Private Placement Memorandum can assist in all of your 144a requirements.

CUSIP Filing / Number

CUSIP is the universally accepted standard for uniquely classifying financial instruments across exchanges and institutions worldwide. The CUSIP system provides identification and descriptive information for nearly 8.5 million financial instruments. The CUSIP system helps to support accurate and efficient clearance and settlement, and processing of income payments throughout the life cycle of a financial instrument. Private Placement Memorandum can assist in all of your CUSIP requirements.

ISIN Filing / Number

ISIN, International Securities Identification Number (ISIN), uniquely identifies a security. Securities for which ISINs are issued include bonds, equities, commercial paper and warrants. The ISIN code, in the form of a 12 digit (alpha numerical) code that does not contain information characterizing financial instruments or the business at hand, but only serves for uniform identification of a security at trading and settlement. Securities with which ISINs can and are often used include debt securities, such as bonds, shares, options, derivatives and futures. Private Placement Memorandum can assist in all of your ISIN requirements.

Bond Offerings

Private Placement Memorandum can assist your firm with bond offerings. In finance, a bond is defined as debt security. In a bond offering, the issuer of the security pledges (and therefore really owes) holders of the debt an assigned interest on the coupon. In other words, Bond Holders are ‘promised’ a certain return on their ‘investment’ for the loan they give. Furthermore, depending on the terms of the bond, the issuer is obligated to pay interest (the coupon) and/or to repay the principal at a later date. This later date is called maturity. A bond, therefore, is a formal contract to repay borrowed money with interest at fixed intervals. Often times, the issue will create a Private Placement Memorandum and offer the bonds, via private offering, through the Private Placement Memorandum PPM, as opposed to a public bond offering. Private Placement Memorandum can assist in all of your bond requirements.

DTCC Registration (The Depository Trust & Clearing Corporation)

Private Placement Memorandum can assist your company in registering with The Depository Trust & Clearing Corporation (DTCC). DTCC, via its subsidiaries, provides the following: clearing, settlement and information services for equities; corporate and municipal bonds; government and mortgage-backed securities; money market instruments as well as over the counter derivatives. Additionally, DTCC is an industry leader in providing the processing of mutual funds and insurance transactions, as well as linking funds and carriers with their distribution networks. Private Placement Memorandum can assist in all of your DTCC registration requirements.

Private Placement 144a Services

Private Placement Memorandum can assist with your Rule 144a private placement offering. Rule 144a, adopted pursuant to the U.S. Securities Act of 1933, as amended (the “Securities Act”) provides a safe-harbor from the registration requirements of the Securities Act of 1933 for certain private resales of restricted securities. This is mainly undertaken when offered to Qualified Institutional Buyers (QIBs), which mainly consists of institutional investors with over $100 million in investable assets. When a broker or dealer (Broker Dealer) is selling securities such as a stock or debenture or a Unit, in reliance on Rule 144a, it is subject to the condition that it may not make offers to individuals other than those it reasonably believes to be Qualified Institutional Buyers.

144a Increased Liquidity

Ever since its adoption, Rule 144A has greatly increased the liquidity of the securities affected. This is because the institutions can now trade these formerly restricted securities amongst themselves, thereby eliminating the restrictions that are imposed to protect the public. Rule 144A was implemented in order to induce foreign companies to sell securities in the US capital markets. Private Placement Memorandum, while one of the leading US firms that develop private offerings, engages in the development of Rule 144a offerings many times per month. For companies registered with the Security and Exchange Commission or a foreign company providing information to the SEC, financial statements (such as forward looking statements) need not be provided to buyers. Rule 144A has become the principal safe harbor on which non-U.S. companies rely when accessing the U.S. capital markets.

144A and NASDAQ

Since 1990, the Nasdaq Stock Market offers a compliance review process which grants the Depository Trust & Clearing Corporation (DTCC, see below) book-entry access to 144A securities.

Rule 144 vs. 144a

144A should not be confused with Rule 144, established by the Security and Exchange Commission under the 1933 Act, permits, under limited circumstances, the sale of restricted and controlled securities without registration.

144a Private Placement Memorandum

Private Placement Memorandum’s 144a private placement services brings together a whole host of characteristics for companies seeking access to the capital markets. Along with your Private Placement Memorandum offering document (PPM or Offering Memorandum, an OM), you would need to acquire a CUSIP number (or ISIN number, if outside the US). Based on the type of investor allowed to purchase these securities, CUSIPs (registration numbers) are assigned for each type of qualified institutional buyer that can purchase a part of the offering.

144a Senior Life Settlement Policies

Nature of the Policies

Private Placement Memorandum can help structure your 144a offering senior life settlement.

Senior life settlements, in general, are life insurance Policies that have been issued on the lives of people whose life expectancy has been estimated by trained medical professionals. These life insurance Policies are then sold to investors for an amount that is less than the face amount of the Policy that will become due and payable upon the death of the insured. Usually, the insured person on these Policies is elderly ranging in age from 65 to 85 years old. Senior life settlements are often compared to zero-coupon notes in that they are Policies that are purchased at a discount to their face value with this so-called “amount certain” becoming due in the future. When a person purchases a zero coupon note or other debt instrument, the maturity date is certain and is printed on the instrument; in contrast, when an investor purchases a senior life settlement Policy, the maturity date is uncertain as the date and time of death of the insured is unknown.

Consequently, the purchaser of the senior life settlement Policy must continue to pay the premiums on the Policy to maintain the insurance coverage in force. The amount of time that the insured lives thus directly impacts the rate of return for the investor; further, each additional year of coverage requires additional premium expenditures which decrease the ultimate return realized.

When senior life settlement Policies are sold, the discounts to face amount are determined by the life expectancy, individual Policy features and market conditions for the Policy. Yield is computed from the difference between the cost basis (including any premiums paid) and the amount paid out under the Policy on its maturity. An annualized return on investment can be derived by dividing the yield by the number of years remaining until it matures. While any licensed life insurance company may issue life insurance Policies, the life insurance industry in the United States is highly regulated and controlled for the protection of not only the investors who purchase and own securities in these companies, but most importantly for the people who are buying the insurance Policies in the first instance.

Acquisition of the Policies

Senior life settlement transactions involve the sale of an existing life insurance Policy to another party. By selling the Policy, the policyholder receives an immediate cash payment to use as he or she wishes. The purchaser takes an ownership interest in the Policy at a discount to its face value and receives the death benefit under the Policy when the insured dies.

For the protection of the seller’s ownership interest and the purchaser’s monetary interest, all transactions are closed through an independent escrow agent. The escrow agent closes a purchase when it receives from the purchaser an executed Policy funding agreement and the acquisition price for a Policy, verifies that the Policy is in full force and effect and that no security interest has attached to the Policy, and receives a transfer of Policy ownership form acknowledged by the insurance company or receives an assignment of the beneficial interests in the trust from the beneficiary and from the trustee of the trusts that hold the Policy. The escrow agent then pays the seller the purchase price (net of fees and costs).

Private Placement Memorandum can act as escrow agent with respect to the purchase of the Policies. At the closing of the purchase of the Policy, the title to the Policy is transferred into the Company’s name (except where a beneficial interest in a trust is being assigned in which event title remains in the name of the trust). Under the Indenture, the Company will execute a collateral assignment of the Policies in which the Company will purchase and grant to the Trustee a security interest in the beneficial interests of trusts holding Policies that the Company will purchase in each case for the ratable benefit of the Noteholders and Private Placement Memorandum or another escrow agent will hold the Policies as custodian. After the closing, responsibility for Policy premium costs passes to the Company as purchaser, and we will fund the premium costs and servicing fees through a Premium Reserve Account set up under the terms of the Indenture out of which the Trustee will deliver to the Servicer, and the Servicer will then pay, the premiums on our behalf and receive its fees. The confidentiality of a life settler’s personal information is maintained throughout the purchase of the Policy insuring his life.

Rule 144A Offerings – A Brief Overview

Private Placement Memorandum summary of Rule 144A of the Securities and Exchange Commission and a form of transaction that has recently been developed since the adoption of Rule 144A. Information subject to change without notice.

144A Offering Resembles a Public Offering

• A preliminary offering memorandum (Private Placement Memorandum or offering circular) is prepared that is similar in content to a prospectus in a public offering but the pricing terms are left blank.
• The underwriters, often referred to in this context as initial purchasers, market the offering and conduct a road showing with executives of the company.
• The company and the initial purchasers agree upon pricing terms, which are inserted into a final offering memorandum or offering circular.
• The initial purchasers buy the securities from the company at a price below the offering price and immediately resell the securities to the ultimate buyers at the offering price.
Advantages of a 144A Offering vs. a Registered Pubic Offering
• A 144a offering has more flexibility in disclosure because there are no detailed disclosure requirements and initial purchasers and their counsel are more willing to be flexible than in a public offering.
• A Rule 144A offering can be completed quicker than a public offering because the offering memorandum is not filed with and reviewed by the Securities and Exchange Commission.
• A Rule 144A offering does not trigger the periodic reporting requirements of the securities laws.
Disadvantages of a 144A Offering vs. a Public Offering
• A 144a Offering can offer only to certain institutions so the offering size may not be as large as would be possible in a public offering. This also adversely affects the secondary trading market.
• Restrictions are imposed on the resale of the securities so the price may not be as high as in the case of a public offering.
• There are more restrictions on advertising and publicity.

Exchange Offers

In order to minimize the disadvantages of a pure Rule 144A offering, many companies will also agree to an exchange offer.

• The SEC basically allows this type of exchange offer if debt securities are involved or, in the case of non-U.S. companies, either debt or equity.
• The company agrees to file a registration statement under the Securities Act of 1933 with a specified time period after the closing of the Rule 144A offering (usually 90 days) in order to register an exchange offer.
• In the exchange offer, the company offers to exchange a class of security that is fully registered and freely transferable for the securities sold in the Rule 144A offering that are subject to restrictions on resale.
• The terms of both classes of securities are otherwise identical.
• The company also typically agrees to pay specified damages to the holders of the securities sold in the Rule 144A offering if the exchange offer is not consummated within a specified time period.

Rule 144A

• Rule 144A exempts from registration under the Securities Act of 1933 the resales of securities if the following conditions are met:
• Offers and sales can be made only to Qualified Institutional Buyers (referred to as QIBs), which basically means certain institutions that manage at least $100 million in investments ($10 million in the case of broker-dealers).
• The purchasers are informed that the purchase is not registered under the Securities Act of 1933 in reliance on Rule 144A.
• The securities being offered are not publicly traded in the United States. There are restrictions on offering securities convertible into or exchangeable for publicly traded securities.
• Certain information about the company must be given to the buyer.

Bond Offerings

Private Placement Memorandum can assist your firm with bond offerings. In finance, a bond is defined as debt security. In a bond offering, the issuer of the security pledges (and therefore really owes) holders of the debt an assigned interest on the coupon. In other words, Bond Holders are ‘promised’ a certain return on their ‘investment’ for the loan they give. Furthermore, depending on the terms of the bond, the issuer is obligated to pay interest (the coupon)) and/or to repay the principal at a later date. This later date is called maturity. A bond, therefore, is a formal contract to repay borrowed money with interest at fixed intervals. Often times, the issue will create a Private Placement Memorandum and offer the bonds, via private offering, through the PPM, as opposed to a public bond offering.

A Bond is like a Loan

A bond is like a loan: the issuer is the borrower (debtor), while the holder is the lender (creditor), and the coupon is the interest.

Bonds provide the borrower (often times small businesses) with funds to finance their business, typically with a view towards long-term investment. The government often creates bonds as well which helps finance projects. Bonds are to be repaid at fixed intervals over a period of time (sometimes bonds are offered for many years, upwards of 50).

Bond Securities vs. Stock Securities

Bond, like stock, whether common or preferred, are securities. However, the major difference between bonds and stocks is that stockholders have an equity stake in the company (meaning they own part of the company), whereas bondholders have a creditor stake in the company (meaning they are lenders). They do not own any equity interest in the company.

An additional major distinction between stocks and bonds is that bonds usually have a defined term, called a maturity, after which the bond is redeemed, whereas stocks may be outstanding indefinitely. There are exceptions, namely a bond called “consol bond”, which is a perpetuity (meaning the bond has no maturity).

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