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News Release
December 15, 2009
FHLBank San Francisco’s Standby Letters of Credit Support a Wide Variety of Tax-Exempt Bond Projects
San Francisco–The Federal Home Loan Bank of San Francisco announced today that it has recently issued, on behalf of member financial institutions, 13 Standby Letters of Credit (LOCs) to support non-housing related tax-exempt bond issuances for public-purpose and industrial development projects. In addition to those completed transactions, totaling $167 million in credit enhancement, an additional $110 million of similar Standby LOC transactions are pending. Given the current economic environment, the use of a Bank Standby LOC to credit enhance a tax-exempt bond transaction may help lower the overall cost of borrowing for bond-financed projects and stimulate economic development in communities served by Bank members.
A provision of the Housing and Economic Recovery Act of 2008 (HERA), signed into law last year, amended the Internal Revenue Code to permit a non-housing related tax-exempt bond that is supported by a Federal Home Loan Bank Standby LOC to retain its tax-exempt status, provided the bond is issued before December 31, 2010. Working with a member of the Bank, any entity permitted to issue tax-exempt bonds may benefit from the credit enhancement provided by the Bank’s Standby LOC.
In a typical transaction, the Bank’s member institutions work directly with bond issuers, issue their own direct pay letters of credit, and use the Bank’s Standby LOC to provide the necessary credit enhancement for the transaction.
Standby LOCs for tax-exempt bonds can be used for a wide range of projects. With a Bank Standby LOC, a bond issuer, such as a municipality, hospital, university, nonprofit, or industrial manufacturing facility, may be able to realize advantages typically available only in AAA-rated structures, such as generally lower interest rates or more flexible terms.
“The downgrading of bond insurers in the wake of the financial crisis left a significant void in financing for critical infrastructure and other valuable projects,” said Stephen P. Traynor, Senior Vice President, Financial Services and Community Investment at the Bank. “We are pleased to offer a tool that our members can use to support these kinds of projects and boost economic development activities in their communities.”
Bank Standby LOCs have been issued to support a wide variety of projects that meet particular demographic and geographic criteria, as specified in HERA. To date, a sampling of these transactions includes:
- At the request of member City National Bank, the Bank issued a $9.1 million Standby LOC to support a bond issued for the purchase of additional equipment and building improvements at Pocino Food Company’s City of Industry production facility. Pocino is a third-generation manufacturer and producer of Italian meat products in Los Angeles. City National Bank expects the project to create or retain 200 jobs in a designated redevelopment area.
- At the request of member Pacific Capital Bank, the Bank issued a $5.6 million Standby LOC to support a bond issued for new construction and renovations at two Central Coast YMCAs, and the Bank issued a $6.6 million Standby LOC to support a bond issued for The Bay Institute’s acquisition of San Francisco’s Aquarium of the Bay. Pacific Capital Bank expects that converting the Aquarium into a nonprofit center for research and education will create or retain 110 jobs.
- At the request of member California Bank & Trust, the Bank issued a $6.0 million Standby LOC to support a bond issued for construction of a new facility for finish carpentry firm Guy Evans, Inc., in Indio, CA, and a $3.0 million Standby LOC was issued to support construction of a warehouse for McGarry Street LLC’s Green Farms produce distribution operation in Los Angeles. California Bank & Trust expects the two projects to retain or create approximately 325 jobs in Southern California.
The additional $110 million in pending Standby LOC transactions with member financial institutions are slated to support the rebuilding of an urban trauma center, construction of a new research wing for a hearing institute serving an economically disadvantaged population, and expansion of two manufacturing facilities.
Visit the Community Investment section at fhlbsf.com for more information about the Bank’s Standby Letters of Credit and other community revitalization and economic development products and programs.
The Federal Home Loan Bank of San Francisco
The Federal Home Loan Bank of San Francisco delivers low-cost funding and other services that help member financial institutions make home mortgages to people of all income levels and provide credit that supports neighborhoods and communities. The Bank also funds community investment programs that help members create affordable housing and promote community economic development. The Bank’s members—its shareholders and customers—are commercial banks, credit unions, savings institutions, thrift and loans, and insurance companies headquartered in Arizona, California, and Nevada.
Contact:
Mary Long, 415-616-2556
longm@fhlbsf.com
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News Release
December 15, 2009
FHLBank San Francisco’s Standby Letters of Credit Support a Wide Variety of Tax-Exempt Bond Projects
San Francisco–The Federal Home Loan Bank of San Francisco announced today that it has recently issued, on behalf of member financial institutions, 13 Standby Letters of Credit (LOCs) to support non-housing related tax-exempt bond issuances for public-purpose and industrial development projects. In addition to those completed transactions, totaling $167 million in credit enhancement, an additional $110 million of similar Standby LOC transactions are pending. Given the current economic environment, the use of a Bank Standby LOC to credit enhance a tax-exempt bond transaction may help lower the overall cost of borrowing for bond-financed projects and stimulate economic development in communities served by Bank members.
A provision of the Housing and Economic Recovery Act of 2008 (HERA), signed into law last year, amended the Internal Revenue Code to permit a non-housing related tax-exempt bond that is supported by a Federal Home Loan Bank Standby LOC to retain its tax-exempt status, provided the bond is issued before December 31, 2010. Working with a member of the Bank, any entity permitted to issue tax-exempt bonds may benefit from the credit enhancement provided by the Bank’s Standby LOC.
In a typical transaction, the Bank’s member institutions work directly with bond issuers, issue their own direct pay letters of credit, and use the Bank’s Standby LOC to provide the necessary credit enhancement for the transaction.
Standby LOCs for tax-exempt bonds can be used for a wide range of projects. With a Bank Standby LOC, a bond issuer, such as a municipality, hospital, university, nonprofit, or industrial manufacturing facility, may be able to realize advantages typically available only in AAA-rated structures, such as generally lower interest rates or more flexible terms.
“The downgrading of bond insurers in the wake of the financial crisis left a significant void in financing for critical infrastructure and other valuable projects,” said Stephen P. Traynor, Senior Vice President, Financial Services and Community Investment at the Bank. “We are pleased to offer a tool that our members can use to support these kinds of projects and boost economic development activities in their communities.”
Bank Standby LOCs have been issued to support a wide variety of projects that meet particular demographic and geographic criteria, as specified in HERA. To date, a sampling of these transactions includes:
- At the request of member City National Bank, the Bank issued a $9.1 million Standby LOC to support a bond issued for the purchase of additional equipment and building improvements at Pocino Food Company’s City of Industry production facility. Pocino is a third-generation manufacturer and producer of Italian meat products in Los Angeles. City National Bank expects the project to create or retain 200 jobs in a designated redevelopment area.
- At the request of member Pacific Capital Bank, the Bank issued a $5.6 million Standby LOC to support a bond issued for new construction and renovations at two Central Coast YMCAs, and the Bank issued a $6.6 million Standby LOC to support a bond issued for The Bay Institute’s acquisition of San Francisco’s Aquarium of the Bay. Pacific Capital Bank expects that converting the Aquarium into a nonprofit center for research and education will create or retain 110 jobs.
- At the request of member California Bank & Trust, the Bank issued a $6.0 million Standby LOC to support a bond issued for construction of a new facility for finish carpentry firm Guy Evans, Inc., in Indio, CA, and a $3.0 million Standby LOC was issued to support construction of a warehouse for McGarry Street LLC’s Green Farms produce distribution operation in Los Angeles. California Bank & Trust expects the two projects to retain or create approximately 325 jobs in Southern California.
The additional $110 million in pending Standby LOC transactions with member financial institutions are slated to support the rebuilding of an urban trauma center, construction of a new research wing for a hearing institute serving an economically disadvantaged population, and expansion of two manufacturing facilities.
Visit the
Community Investment section at
fhlbsf.com for more information about the Bank’s
Standby Letters of Credit and other community revitalization and economic development products and programs.
The Federal Home Loan Bank of San Francisco
The Federal Home Loan Bank of San Francisco delivers low-cost funding and other services that help member financial institutions make home mortgages to people of all income levels and provide credit that supports neighborhoods and communities. The Bank also funds community investment programs that help members create affordable housing and promote community economic development. The Bank’s members—its shareholders and customers—are commercial banks, credit unions, savings institutions, thrift and loans, and insurance companies headquartered in Arizona, California, and Nevada.
Contact:
Mary Long, 415-616-2556
longm@fhlbsf.com
© 2000-2012 Federal Home Loan Bank of San Francisco
News Releases