Skip to content

144A Private Placement Program Overview

144A Private Placement Program Overview

Below is sample of how a private placement under Rule 144A may be undertaken. Pleases note this just a sample and each case merits differing terms. Below is only used as a sample illustration and is no way legal advise.

  • Execution of Engagement Letter, Board Advisor Agreement, Non Disclosure Letter
  • Payment of terms under contract
  • Base payment due for the completion of a 144a offering memorandum, operational for sale to investors, the exact price will be listed in the engagement terms.  Cost will be dependent on the project and at what stage the client has achieved.
  • Whether the offering is 5 Million or 1.5 Billion the cost to effectuate the completed offer will be all inclusive in the cost under the terms of engagement.
  • The client will still be responsible for two elements outside of the engaged cost; Legal and Accounting on the company’s behalf
  • Submission by the client of required documentation
  • Memorandum & Articles of Association w/ updated filings
  • Enlarged copies of all principal’s passports and state id’s
  • Executive summary of the company
  • Corporate balance sheet
  • Corporate address, phone, and facsimile number
  • Appraisals
  • Surveys
  • Technology
  • Key Power Purchase Agreements
  • Guarantees (federal, state, local government or private)
  • Corporate assets/collateral description package with supporting documentation
  • Future projects list
  • Current & 5-10 year project financial statements (GAAP)
  • Business plan
  • Audit Reports, References, Political Ties, Government Support
  • Any other supporting documents relative to the company and project
  • Due Diligence on the project, engineering, documentation, corporation and financial data
  • Due Diligence Reports
  • Regional Report on the jurisdiction of the project
  • FBI, FINRA, SEC, SIPC, Interpole, IRS, Local and Federal criminal background checks
  • Corporate background checks
  • Engineering
  • Technology
  • Management overview and team
  • Financial review
  • Creation of the bank and market compliant offering memorandum to investors
  • The private placement memorandum will be created based on information submitted by the client and all necessary securities offering language & structure
  • Once complete PPM.NET will provide a draft copy of the PPM/offering to the client for review with their counsel
  • After review, any changes will be addressed in writing
  • Once a final approval of the PPM has been issued, any last adjustments will be made and the completed offering memorandum will be delivered via electronic format to the client(s)
  • Trust Indenture (if necessary)
  • The trust indenture if necessary depending on jurisdiction is a key element of a private securities 144A offering memorandum
  • This document outlines the actual note being purchase and how it is expected to behave, also what would happen in case of default by the issuer
  • Acceptance by a Trustee Bank or Trustee Corporation
  • Notes, Guarantees and any other relative securities documents
  • The offering memorandum and trust indenture has been accepted by all parties and a trustee bank or trustee corporation.  It is now time for the licensed placement agent engaged, securities attorney and clients proper securities representation to complete one of the last stages.  The notes and guarantees among other final securities documents are an intricate part to create the operating offering to investors.  Once completed the full offering can be acted on by any qualified investor.  Any investors will be responsible to fill out the proper documentation to prove they are of qualified status under Rule 144a.
  • Electronic Filing (if necessary)
  • Electronic filing is a form of a electronic booking system that allows electronic transfer, housing, verification and more but only for securities that pass electronic compliance standards.  This is only compliant with securities under Rule 144a and not Regulation D or any other private security that cannot obtain identifiers (ISIN & CUSIP).  Some investors will require this before the sale of securities can be finalized.  This can be arranged with DTCC, Clearstream or Euroclear. At this time the fully operating offering to investors can be introduced only to Qualified Institutional Buyers on a best efforts basis.

 Conversion Options:

  • Convert the corporate security offering from private to public only under Rule 144a
  • A licensed securities agent introduced by PPM.NET would be available to convert the corporate security offering from private to public i.e. take the corporation public via public offering or reverse merger
  • Some investors like the option of a convertible offering, this has become very popular recently.  This gives the investor a cash out option and also eliminates the debt to the issuer
  • All procedures would be instructed by the licensed agent engaged and PPM.NET would manage the process for the company acting as Board Advisor
  • There is a cost associated which can be built in to the offering or paid out of pocket; please inquire within for current pricing
  • An investor could request the offering become convertible to public stock, to exchange the invested principle into common stock equity of the company
  • The company/issuer can also perform a public listing simultaneous as the 144a capital raise to show a proper exit strategy.  This will bring more investors forward and also some hedge funds that can invest in start-up public companies and may provide initial rounds of financing (Mezzanine Financing)

 Rating Options:

  • Acquiring a rating from Standard & Poors and/or a rated insurance company
  • A licensed securities agent, introduced by may complete the rating process with S&P, or PPM. net may complete with a proper insurer
  • All costs for the process can be verified by S&P and supporting casts, the funds will need to be available before the start of this process
  • Time lines depend on market conditions and back logs of S&P or the insurers
  • The rating process will also help to liquidate the offering, if a rating is obtained

Rule 144a:

Rule 144A, adopted pursuant to the U.S. Securities Act of 1933, as amended (the “Securities Act”) provides a safe harbor from the registration   requirements of the Securities Act of 1933 for certain private resale’s of the restricted securities to QIB’s (qualified institutional buyers), which generally are large institutional investors with over 100 Million of investable assets.  When a broker or dealer is selling securities in reliance on Rule 144A, it is subject to the condition that it may not make offers to persons other than those it reasonably believes to be QIB’s.  Since its adoption, Rule 144A has greatly increased the liquidity of the securities affected.  This is because the institutions can now trade these formerly restricted securities amongst themselves, thereby eliminating the restrictions that are imposed to protect the public.  Rule 144A was implemented in order to induce foreign companies to sell securities in the US capital markets.  Since 1990, the Nasdaq Stock Market offers a compliance review process which grants Depository Trust & Clearing Corporation (DTCC) book-entry access to the 144A securities.  Nasdaq has also launched an Electronic Trading Platform for 144A securities in late 2007-08 and had a pending Rule Filing with the SEC.  Not to be confused with Rule 144A, rule 144, established by the SEC under the 1933 securities act, permits, under limited circumstance, the sale of restricted and controlled securities without a registration.