Private vs Public Placements and Types of Distributions

Private vs Public Placements and Types of Distributions -...

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PRIVATE vs. PUBLIC OFFERINGS AND TYPES OF DISTRIBUTIONS I. Private Placements A. Are directly placed with the final investors who purchase the entire offering at one time (limited number of investors) B. Most private placements involve debt instruments (bonds) C. Largest investors in a private placement 1. Life insurance firms (take your life insurance premiums and invest them on behalf of the life insurance firm 2. State and local retirement firms (CALPERS is one of the largest – California Public Employees’ Retirement System) 3. Private Pension Funds D. Advantages vs. Public Offerings: 1. Greater speed in issuance than public placement in that the issuing company gets its money quicker 2. Lower costs (flotation costs) associated with the issuance a. Attorney fees b. Printing and engraving costs c. Distribution costs (no middlemen or “investment bankers” are involved) 3. Flexibility is increased in the financing contract (“indenture agreement”) between the issuer and bondholders
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This note was uploaded on 08/22/2009 for the course FIN 3310 taught by Professor Potts during the Spring '08 term at Baylor.

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Private vs Public Placements and Types of Distributions -...

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