A bond placement is the process of selling a new bond issue often to an intitutional investor. For a company in need of financing, this a typical transaction arranged through an investment banker.
A bond placement is the process of selling a new bond issue often to an intitutional investor. For a company in need of financing, this a typical transaction arranged through an investment banker.
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The role of the placement agent is to help structure the transaction and find potential investors that are willing and able to invest in the offered securities. The placement agent acts as an agent on behalf of the issuer but does not purchase the offered securities directly, either for its own account or for clients.
An IPO is underwritten by investment banks, which then make the securities available for sale on the open market. Private placement offerings are securities released for sale only to accredited investors such as investment banks, pensions, or mutual funds.
An underwriter purchases bonds from an issuer with the intent to resell the bonds to investors. A placement agent acts as agent for the issuer in selling bonds to a private placement purchaser, and, as such, does not purchase the bonds.
The underwriter is allotted a certain period of time to sell the issue, usually between 30 and 90 days. If a required portion of the issue has not been sold by the end of the subscription period, the offering will be cancelled, the securities are returned to the issuer, and the money is returned to the investors.
The placement agent is compensated upon the successful placement of the fund with the investor(s) introduced by the agent. The agent's compensation, around 2% to 2.5%, is typically a percentage of new money raised for the fund.