Subordinated Revenue Bonds
Subordinated revenue bonds are issued to finance capital projects and facilities as described under the Revenue Bonds tab. Security for revenue bonds remains the same except there are outstanding revenue bonds (senior debt) at the time of issuance, and there is a prior lien on the revenue that is pledged for the subordinated bonds. Subordinated bonds are typically issued when certain contractual elements prohibit or restrict the municipality from issuing more revenue bonds at parity. Examples such as restrictive rate covenants and parity bond tests requiring the municipality to raise fees, rates, and charges to a level that is not reasonable or politically acceptable.
All American Investment Group (“All American”) underwrites subordinated revenue bonds on a private placement basis.
Certificates of Participation (COPs)
Some lease purchase agreements, can be sold as Certificates of Participation. These can be issued and marketed to investors similar to tax exempt bonds. A government (lessee) enters into an agreement with another party (lessor) to lease an asset over a negotiated period of time, at a predetermined annual lease payment amount. The payment amount is sufficient to cover the principal and interest components of the leased assets. Then All American identifies a group of investors that provide funding for the leased asset in return for a proportional share of the annual lease payments made by the lessee government. In order to avoid the statutory limitations related to tax exempt debt, lease payments are subject to annual appropriation of revenues.