Illinois Administrative Code › Title 74 - PUBLIC FINANCE › Part 1100 - ILLINOIS FINANCE AUTHORITY › Subpart F - LOAN PARTICIPATION PROGRAM › Section 1100.660 - Method of Financing

Current through Register Vol. 48, No. 28, July 12, 2024
Three methods of financing are now available:
a) Lease Method. Under this method the
				Authority acquires title to the educational or cultural facility to be
				financed, issues bonds to finance its cost and leases the facility to the
				participating institution under a lease with a term equal to the final maturity
				of the Authority's bonds and with rental equal to principal and interest on the
				bonds. At the end of the lease term, the Authority is required to reconvey
				title to the facility to the participating institution.
b) Ground Lease Method. This method, which
				the Authority does not encourage, is a variant on the Lease Method. Here the
				participating institution retains title to the facility and leases it to the
				Authority for a nominal rental with a Sublease back to the participation
				institution for a term equal to the maturity of the bonds and at rentals equal
				to principal and interest. A mortgage of the facility by the Authority is
				possible under both these Methods (subject, of course, to the rights of the
				participating institution under the Lease or Sublease) and may be recommended
				in some instances to reduce interest costs. Both of these Methods also
				contemplate that the participating institution will guaranty the
				bonds.
c) Secured Note Pass Through
				Method. Under this Method the participating institution issues a secured note
				to the Authority, secured by a first mortgage lien on the facility to be
				financed or by a first mortgage lien on or security interest in other real or
				personal property acceptable to the Authority. The determination of what real
				or personal property is acceptable to the Authority for security purposes in
				each instance is based on a variety of factors that include, but are not
				limited to, the following: the credit worthiness of the participating
				institution; the requirements of the particular market in which the related
				bonds are proposed to be offered for sale; the preferences of the participating
				institution, including the availability to it of various types of real and
				personal property for use as collateral; the requirements or suggestions of any
				rating agency that is providing a rating of the related bonds; and the legality
				of the proposed collateral structure, particularly insofar as it relates to the
				federal tax-exempt status of interest on the related bonds. In reviewing the
				foregoing factors and determining the acceptability of a proposed security
				arrangement, the Authority relies to a significant extent upon advice provided
				by its financial advisor, insofar as financial matters are concerned, and its
				bond counsel, insofar as legal matters are concerned. The Authority, in turn,
				issues its own bonds to purchase the participating institution's note and
				pledges it as security for those bonds. Here, again, title to the facility
				never leaves the participating institution unless, of course, the participating
				institution defaults in payment.