The amount of new debt you will need to borrow to fund the applicable types of projects/financing needs outlined on our home page can be reduced by approximately 16 to 20% if NMTC subsidization can be added to your transaction structure. For example, a $30 MM sized hospital expansion project might receive a net benefit of approximately $5.4 million dollars from the NMTC program. This would mean your loan from a bank or the bonds to be issued to fund your project could be reduced by the amount of the net benefit you may receive from the NMTC program. This would lower the amount of new debt coming onto your books and lower your new debt service obligation.
As a result of reducing the amount of new debt needed to fund your project, your MADS coverage, EBITDA/Debt Service coverage and liquidity ratios such as cash-to-debt will be strengthened. This will help to defend your current credit rating against the increased cost of future financing as a result of potential credit downgrades resulting from over-burdening these key financial metrics.
PLEASE NOTE:
The actual amount of the net benefit possible from applying NMTC leveraging/subsidization must be determined on a case-by-case basis, and the final net benefit at close figure will not be known until closing as all transaction costs can not be known until this time.
Since 2003, many NMTC advisors (including NMTC-experienced law firms and accounting firms) have reported estimated net benefits at the end of the program’s 7-year compliance period in the range of 15 to 20% of the gross value of the NMTCs invested into a project. The nature and complexity of the project will influence the actual net benefit which is realized. Regardless of how deserving any project may be, there is no guarantee of receiving NMTC proceeds from CDEs.