What Are New Markets Tax Credits?
New Markets Tax Credits (NMTCs) provide leveraging which can serve like equity to help subsidize/reduce the cost of qualified projects. Qualified projects can include capital expansion projects, business operating expense financing or the refinancing of existing debt.
How do NMTCs help me expand our investment capital and strengthen our balance sheet?
NMTC leveraging can reduce the amount of new debt required to fund a project and therefore also reduce your debt servicing burden. Key credit rating agency metrics such as cash-to-debt and MADS coverage can be optimized through the use of NMTC leveraging.
What does it take to qualify for NMTCs
HCDG can determine if you meet the NMTC program’s initial qualifications and then explain to you the increasing degrees of qualification that enhance the probability that your project will be able to attract NMTCs. The NMTC program is designed to encourage investment in relatively low income communities across America, but figuring out if you qualify requires a knowledgeable NMTC advisor. For example, two different hospitals which appear to be in the same general community may in fact be viewed differently by the NMTC program. We can make an initial determination of whether or not you meet the program’s initial qualifications fairly quickly.
Can my healthcare delivery system use NMTCs if we are a
Not-For-Profit organization?
Yes, these tax credits are "monetized" for you by a third party tax credit investor identified by HCDG and to whom your funding needs will be presented. HCDG will then collaborate with the tax credit investor to collect all of the necessary documentation and help close the transaction.
Can our hospital leverage tax-exempt bonds with NMTCs?
HCDG has relationships with outstanding combined NMTC and tax exempt bond knowledgeable law firms who it can bring into qualified opportunities to provide the necessary opinion letters to support the combination of tax exempt bonds with NMTC subsidization.
Can HCDG help us structure and close an NMTC transaction with NMTC=knowledgeable commercial banks, investment banks and underwriters?
Yes, HCDG has formed relationships with all of the law firms who have worked on the majority of NMTC transactions since 2003, as well as additional top law firms who bring equal NMTC, tax and healthcare industry knowledge and experience to the table. HCDG has attracted $350 MM of commitments for approved NMTC transactions from several top-tier commercial banks. HCDG has a strong relationship with the largest issuer of healthcare delivery system bonds in the country as well as other significant Underwriters. HCDG has relationships with the two most NMTC transaction-experienced accounting firms in this arena.
What services will HCDG provide?
HCDG provides NMTC related financial/transactional advisory services to healthcare industry clients who are unfamiliar with leveraging NMTCs. We will spearhead the process of lining up all of the necessary participants to pursue and close NMTC leveraged transactions. For projects above $20 MM, multiple NMTC investors are usually needed. HCDG will perform the role of "packager/syndicator" to bring together the lenders, capital sources, NMTC investors (other CDE's), tax credit buyers/investors (third parties), lawyers and accountants needed to structure and close NMTC subsidization opportunities. HCDG is also open to exploring joint venture, co-investment and other forms of Partnership opportunities in connection to healthcare industry opportunities with qualified and appropriate parties. Through its parent company, SSB Solutions, HCDG has built up approximately 20 years of strong and trusted relationships with hospitals and other healthcare delivery systems nationwide. Visit our parent company's website at www.ssbsolutions.com
Does HCDG have NMTCs to invest in my project?
HCDG has submitted a comprehensive application to the U.S. Treasury’s CDFI Fund’s NMTC Program seeking an allocation of New Markets Tax Credits in January 2012. However, HCDG is prepared right now to perform the role of lead consultant to prepare clients for pursuing NMTCs for their projects, present client projects to and attract interested and appropriate banks and/or underwriters/investment banks to our client’s projects (term sheets offering NMTC leveraging options are created for Board approval), properly present our client’s projects to interested CDE’s and tax credit investors and finally manage the process of collecting all of the necessary documentation/agreements necessary to close the commitments to invest the targeted NMTCs into our client’s projects. All aspects of the NMTC leveraging/subsidization process can be managed by HCDG.
What will HCDG charge for its advisory and investment services?
Our fee structure is determined on a case by case basis depending on the complexity and size of the targeted transaction. The vast majority of the transaction fees associated with NMTC opportunities are “success-based” and not paid until the successful close of these transactions. Furthermore, the vast majority of all transaction fees are “built into” the starting gross value of the New Markets Tax Credits which are invested in a project. The “net benefit” from using NMTC leveraging is what is left over after all transaction fees have been taken out of the starting gross value of the NMTCs invested into a project. Since 2003 the reported net benefits have ranged from 15 to 20% of the project budgets (assuming the NMTCs available to a project are equal to 100% of the total budget of the project before transaction costs are taken out).
How much time is required to structure and NMTC leveraged financing?
Generally speaking HCDG will need six months from start to finish to assemble and prepare documentation to close an NMTC commitment. HCDG will work “in parallel” with the efforts of a participating bank or underwriter, once an interested bank or underwriter has been attracted to the project. If an interested bank or underwriter has already been lined up by the healthcare provider, then HCDG may be able to pursue, attract and close the targeted NMTCs commitments in an approximately four month period of time. These are just general estimates, as each funding situation must be reviewed on a case-by-case basis to provide appropriate timelines.