Abstract
The world is characterized by different kinds of organizations which have different obligations that they carry out. In order for the organizations to run smoothly, they must have capital to sustain their activities or rather to fulfill their obligations. It is quite unfortunate that many of the organizations are normally characterized with lack of funds to carry out their activities. Presbyterian Homes Inc. is one such organization which is affected by lack of funds. For this reason, its members opted to look for an alternative and that is to apply for a loan to some of the markets for credits such as banks, non-bank financial organizations and many others just to mention a few. Markets for credit serve a purpose of helping out individuals as well as organization to fulfill their obligations by loaning them money and that is the case with Presbyterian Homes Inc.
Choosing a market for credit is not an easy job. There are some of the factors which ought to be considered. These are like the interest rate, the period and mode of payment and many other more (Herbert 2008). Presbyterian Homes Inc. choose to acquire money from a banking financial institution as normally these types of market for credits are usually established to help out such an organization. Individuals are given loans as banking financial institutions work with groups of people and also individuals. This is basically the reason why Presbyterian Homes Inc. opted to apply for a loan from such a financial institution.
Just like any other organization Presbyterian Homes Inc. has its obligations that it would like to fulfill as mentioned there earlier. This is the sole purpose for the funds. The money will be used for some activities such as finishing of some projects of the organization; acquisition of 12 acres of land in Lancaster, reimbursement for acquisition of some land, 120 acres, construction and equipping and lastly improvements as well as renovations (Herbert 2008). This is generally what the group plans to use the funds for.
The group is being financed in two ways; the Series A bonds and the series B bonds. The authority is the money lender but has chosen to give out the money in two ways as mentioned above under a document called the Master indenture. The first way has got its own requirements or rather demands while the second one has its own demands. Series A bonds have got their own notes which the group has adhered to and so does Series B bonds. This is how Presbyterian Homes Inc. has been funded.
Bondholders are offered a high level of security. The notes issued in both series; Series A and Series B bonds have got their limitations. There is an assurance of security interests in terms of amounts generated under the Master Indenture when Presbyterian Homes Inc. pays back the loan. More over there are terms and conditions set which ensure bondholders of their safety.
The investment banker involved in the loaning of money to Presbyterian Homes Inc. is the bond trustee in the Bank of America (Herbert 2008). They are the one who receive notes form the borrowers in this case Presbyterian Homes Inc. stating its promises to uphold to the said agreement related to the issuing of the loan. They act as the link between the group and the authority as they handle the transaction as well as any other important procedure which is required.
The bonds are most definitely rated. They are arranged according to the interest rate which the group will have to pay back with followed by the year (Herbert 2008). The rating of the bonds is just at the beginning of the offering statement. The rating is different from one bond to another as the principal amount also differs from one year to another. They therefore do not have the same rate.
The funds as said above are being lent to Presbyterian Homes Inc. which is a group or rather corporation which mainly focuses on building homes for people. The group has unfinished and also new projects it wants to start and that is the reason why it has applied for a loan to fund its activities and thus fulfill its obligations.
The payment schedule for the bonds is located on page 17. There is a list of the years and also the rate of interest to which the group will be required to pay. According to the table, the last payment is due the year 2038 and is worth, 3,697, 200 dollars (Herbert 2008).
There are certain risks which are associated with these bonds. they are; uncertainty of revenue, the failure of maintaining occupancy or rather turnover, competition, occupancy of mortgage facilities, health care industry factors, changes in tax, liability claims and loses and lastly investment risks.
The obligated group is require to live up to the debt service coverage ratio. It is one of the requirements which the group must uphold numerically 1.25. There is also a reserve ratio which the group is required to maintain and it is 0.25 (Herbert 2008). These are the two key covenants which make sure that the corporation is alert and meets the recommended obligations.
Some continuing disclosures have been made to the bondholders. They are sort of obligations and they include; copies of annual financial statements, calculation of the group’s compliance and lastly reports of the occupancy of the mortgaged facilities.
References
Herbert J. “PRESBYTERIAN HOMES OBLIGATED GROUP” 2008
