3.7.  Private Placements

A private placement is a private offering of securities to no more than 35 sophisticated municipal securities investors.

Rather than go through the rigorous process of a public offering, issuers may decide to sell privately to a single or a few institutional investors that are buying for their own account. With a private placement, the issuer’s financial information is disclosed only to its immediate investors, and its bonds are not made available to the secondary market. Issuers whose credit is of lower grade or unrated may often prefer a private placement. Revenue bonds, and especially industrial revenue bonds, are commonly issued through a private placement.

The issuer will hire a private placement agent as a sort of underwriter to find and secure sophisticated institutional investors for the new issue. Rather than purchase the securities from the issuer and resell them, however, the private placement agent will sell the bond for the issuer on an agency basis. Like any underwriter, placement agents must be registered as broker-dealers with the SEC.

The issuer of a private placement does not publish an official statement,