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Lindley Estes is a business writer for The Free Lance-Star and This blog is on Fredericksburg-area business. Send an e-mail to Lindley Estes.

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SEC looking into muni bond issuances by private, nonprofit companies

The Securities and Exchange Commission is looking into financing arrangements in which a private or nonprofit company issues tax-exempt municipal bonds by using a public entity such as an Economic Development Authority as a conduit, according to today’s Wall Street Journal. Private companies and nonprofits benefit by getting a lower interest rate on the debt, and the public sector entity receives a fee despite bearing no risk to pay back the money. Such deals typically involve projects that are expected to boost economic development. Federal regulators are concerned that financial disclosure requirements are looser in the muni-bond market than they would be with a bank loan or corporate debt, and that makes it harder for investors to evaluate the bonds. The SEC is considering requiring issuers of “conduit” debt to disclose the same financial details that they would with corporate debt, according to the WSJ.

The article was published on the same day in which The Free Lance-Star published a legal ad indicating that Mary Washington Healthcare wants to issue up to $30 million in bonds through the Fredericksburg Economic Development Authority. The money would be used for various projects and purchases at Stafford Hospital and Mary Washington Hospital. Click here for more detail.

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  • bhaas

    Oh – Oh! Very interesting.