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US Private Placement Bonds

A US private placement bond is used when a company wants to raise funds in the US, whether this is for strategic business reasons, aiming to expand into the market, or merely because of the more ‘investor friendly’ environment in the US and enhanced bond enthusiasm as a result.

What is a US Private Placement Bond?

Private placement bonds in the US are bonds that follow the SEC private placement rules exemption 506(b) and (c), which exempt an issuer from registration transactions. This would be because the issuer is not involved in a public offering of the bond, and are therefore bound to these regulations.

Rule 506(b) broadly stipulates:

Rule 506(c) stipulates that issuers can solicit and advertise, so long as:

In the bond selling process, high net-worth, accredited investors would be approached to raise the capital needed to maintain accordance with the SEC’s regulations on Rule 506(b) and Rule 506(c). Generally, this would mean that the minimum investment would be set at $100,000, and the SEC would be notified when the first investor is confirmed.

Furthermore, the bond would also have to follow other SEC regulations, outlined below:

Rule 504 of Regulation D:

Blue Sky Laws:

Blue Sky Laws generally mean that you have to inform authorities in each state in which an investor resides that you are offering the bonds. This would be the state’s SEC equivalent.

For example:

If the initial investor in a bond was from Minnesota, then the authorities in Minnesota would be informed alongside the SEC, for the initial Rule 506 notification process. From there, if another investor were to buy from California, then only the authorities in California would need to be notified. This depends on the state of residence of the investor.

This all comes within Swordblade’s usual process and service and is done concurrently with the bond’s issuance.

Our Private Placement Bond Process.

An initial LLC would be set up, for example, a Delaware LLC as the SPV. A securities lawyer from our network would then be contacted to begin drafting the bond documents.

The securities lawyers would then after drafting the bond continue with the blue-sky process consistently.

There is no need to list the bond on the stock market due to no issues in the US from withholding taxes, so nothing is required from a taxation perspective.

However, if the bond and proceeds from the SPV are being used to then invest in Europe, or outside the US (via the operating company), there may be some interest/taxes involved. If there were financial obligations from outside of the US as a result of the business strategy of a client, the eurobond/stock exchange process would be implemented to ensure the best returns for a client.

There would normally need to be at least one director of the company in the US, as otherwise, the LLC would find it difficult to get a bank account in the US where these large amounts of capital can be deposited. By working with accountants in the US, we allow an accountant to become director of the LLC, to make this process simpler. This could be accountants, lawyers or any other regulated professionals who we work with to facilitate the process. This would be done at the client’s request, and is an optional service.

The bond issuing process in the US is a lot simpler, and in working with partners in the US who are connected to accredited investors, the process would usually take around 4 weeks to be up and running.

Next Steps

If your company is planning to go public and raise funds on the capital markets, we look forward to hearing from you.

The easiest way to get started is to request a free evaluation. By providing minimal information about your company and capital needs, we will be able to provide you with a quick assessment by email. In most cases we can tell you if your business is ready to go public, or not yet.

We’ll also let you know if we think that Swordblade & Co are a good fit for your flotation plans, and anything else that we may think can help you.

Alternatively, if you are ready to talk in depth about floating your company, we recommend you arrange a paid consultation with one of our partners. It can usually be scheduled within a few days and is the fastest way to get detailed advice.