The financing structure is fairly simple.  An industrial development authority issues the bonds and then loans the proceeds to the Company.  The issuer of the bonds will depend upon a number of considerations, including the desire for local participation.  Cities, counties, and certain state agencies are empowered to establish such authorities, as well as to join with other agencies to form such authorities.

The Company’s obligation to repay the loan is secured by a direct-pay Letter of Credit, and the company reimburses the LOC Bank for draws on the letter of credit.  The LOC Bank makes all payments to the Trustee via direct-pay.  The initial term of the Letter of Credit will typically be less than the term of the bonds, which could be as long as thirty years.  Renewal or replacement of the Letter of Credit will keep this structure in place until final repayment of the bonds. 

The Trustee pays bondholders on behalf of the issuing authority.  The issuing authority will receive proceeds at closing from the sale of bonds to the underwriter, which in turn are disbursed to the Company.  The rate on the bonds is adjustable and is reset weekly by the Underwriter in its capacity as Remarketing Agent.