conduit financing

Conduit Financing

A type of financing in which a government or private company issues debt on behalf of a non-profit organization. The debt is guaranteed by the revenue the project that the debt finances generates. Conduit financing is used for the non-profit's capital expenditures.

conduit financing

A method of providing loan money through a debt instrument that blends features of a traditional pass-through mortgage security and a bond.Traded on Wall Street as securities known as REMICs—real estate mortgage investment conduits.For real estate borrowers, the single most important feature of conduit financing is the very large prepayment penalty imposed on all such transactions.The success of the entire securitization process depends upon trustee receipt of regular monthly income for distribution to bondholders according to a prearranged schedule. If a borrower pays off the loan early,that loan will no longer earn any interest,which affects the money available for payment to investors. In order to compensate, the trustee will have to go out into the marketplace and purchase an investment to replace the mortgage paid off. That investment may cost a premium price,so the prepayment penalty is used to offset the premium.

References in periodicals archive ?
Bob McDonnell to the Virginia College Building Authority, which provides financing for capital projects and educational equipment for state higher education institutions and a conduit financing mechanism for private, nonprofit higher education institutions.
The five-year conduit financing was provided by Natixis Real Estate Capital LLC and features interest-only payments for the full term.
Similarly, under the conduit financing regulations, the IRS has the authority to disregard, for purposes of [section] 881, the participation of one or more intermediate entities in a "financing arrangement" where the entities are acting as conduit entities.
McNair, (34) the Supreme Court held that a revenue bond issuance benefiting a sectarian institution did not violate the Establishment Clause, (35) but noted that conduit financing would have the effect of advancing religion when used to fund a loan for a pervasively sectarian institution.
To apply, companies contact a financial adviser who helps them put together the necessary paperwork and guides them through a roughly 90-day process that, if successful, leads toward what is known as conduit financing.
The taxable years at issue in the TAMs were 1990-1994, which precede the final conduit financing regulations issued pursuant to Sec.
On October 11, 1994, the IRS issued the first part of proposed regulations on conduit financing arrangements under IRC section 7701(l).
The final key provision for multi-nationals authorizes regulations to be issued to attack conduit financing arrangements where a U.
An illustration of the ability of a high-volume mortgage intermediary like Meridian to deliver conduit financing for relatively small loans is our deal on 239 Knickerbocker Avenue in Brooklyn.
borrower involved in a "financing arrangement"[30] that is a conduit financing arrangement[31] when the ultimate U.
7701(l) is the statutory basis for the conduit financing regulations.
Once an IE is determined to be a conduit (called a "conduit entity" in the regulations), the IRS then has discretion to determine whether the conduit's participation in a conduit financing arrangement "should be disregarded for purposes of section 881.