Bond Financing Alternatives and Bank Placement Transactions

A Port Authority and its finance professionals can provide access to the capital markets for a borrower by issuing bonds and lending the bond proceeds to the borrower. Depending on the creditworthiness of the borrower, there are a number of ways in which the Port Authority can market its bonds on behalf of a borrower:

  1. A borrower with an investment-grade credit rating can request the Port Authority to sell bonds to institutional investors on the strength of the borrower’s credit.
  2. A borrower without investment-grade credit can seek credit enhancement such as a letter of credit from a financial institution in order to enhance their credit and access institutional investors. With credit enhancement, the Port Authority can sell bonds to institutional investors on the strength of the credit enhancement.
  3. A borrower without investment-grade credit can utilize the Port Authority to place bonds with the borrower’s lending institution. The borrower’s lending institution can simultaneously fund its loan to the borrower and purchase and hold the Port Authority’s bonds as evidence of loan repayment.
  4. A borrower without investment-grade credit can utilize the Port Authority to place bonds with an affiliate of the borrower willing to bear the risk of the investment.

The Port Authority has experience partnering with banks, equipment leasing companies, and other lenders to provide the customers of those lenders with access to tax-exempt markets, credit-enhanced financing for projects that the lender does not have enough credit to finance itself, and fixed-and variable-rate financing. A bank can purchase Port Authority revenue bonds, which can create earned income for a bank and can provide the bank with certain tax-favored results.