Rated and Non-Rated, Enhanced and Unenhanced, Taxable and Tax-Exempt Bonds

Long-term debt, usually tax-exempt bonds or taxable notes, is a popular choice for organizations that need to access capital. Bonds can be rated or unrated. A rating is established by a rating agency and suggests to investors the amount of risk involved in purchasing a particular bond. Both rated and unrated bonds, either taxable or tax-exempt, can be sold with or without credit enhancements, which are generally provided by commercial institutions, such as a bank, public entity or the federal government.

Enhancements make bonds less risk to the investor and more affordable to the organization. Two types of credit enhancements available only through the end of 2010 are Federal Home Bank (FHLB) letters of credit and bank-qualified bonds.

Organizations with excellent credit strength may choose to issue bonds without additional credit enhancement, either rated or unrated. In this case, the risk associated with the bonds is directly related to the borrower’s credit characteristics.

Lancaster Pollard will evaluate the options for your organization and recommend the solution that best fits your needs.

If your financing structure includes variable-rate demand bonds enhanced by a letter of credit, Lancaster Pollard's remarketing agents are committed to insuring you receive excellent service and low fees and rates. Click here for more information.