Welcome to "All About Bonds," where hopefully we can answer all of your questions about the mysterious world of Bonds. But first, let us explain our role in a financing.
The LPFA serves Louisiana and its citizens as a conduit issuer of bonds. That is, the LPFA provides the means for qualifying projects and entities to receive tax-exempt financing and therefore achieve substantial interest cost savings.
The LPFA does not enhance the credit of the underlying borrower, but merely assists by issuing bonds on behalf of the borrower in order to allow the borrower to obtain the savings afforded by a tax-exempt borrowing.
The LPFA’s purpose in a financing is to act as a conduit to pass through the payments from the borrower to the bondholder in order to reduce the financing costs for the borrower.
The bonds issued by the LPFA are payable solely by the underlying borrower from the funds and assets pledged for each individual bond issue.
There are two sides to each financing, the legal side and the financial side. The LPFA and its bond counsel analyze whether the project can legally be financed with tax-exempt bonds. (Federal law restricts what type of entities and projects can receive tax-exempt financing.)
Credit analysis is not the LPFA’s role in a conduit financing. Other parties to the financing are responsible for analyzing the credit of the borrower. The LPFA does not assume the responsibility to determine the creditworthiness of a project or borrower, nor does it assume the resulting legal liability from making such a determination.
The marketplace determines if the bonds are marketable, not the LPFA.
No LPFA funds are at risk in connection with a financing and no funds of the State of Louisiana or any political subdivision thereof are at risk. Each LPFA bond contains language to that effect.
The borrower could pursue financing directly with the bondholders, in which case the interest received by the bondholders would be taxable.
If, instead, the payments from the borrower “pass through” the LPFA as a result of a bond issue, the interest received by the bondholders, in certain circumstances, is tax-exempt.
The LPFA is available as a resource to help any qualifying person or entity in Louisiana obtain the benefits of tax-exempt financing.