Standby Purchase Agreement Definition

A bond purchase agreement (EPS) is a legally binding document between a bond issuer and a sub-contractor that sets out the terms of the bond sale. The terms of a bond purchase agreement include, among other things, terms of sale such as the sale price, the loan rate, the maturity of the loan, provisions for withdrawal of bonds, provisions for declining funds and the conditions under which the agreement may be terminated. In a firm commitment, the underwriting investment bank offers a guarantee for the purchase of all securities offered to the issuer by the issuer, whether or not it can sell the shares to investors. Issuers prefer firm commitment agreements to standby locking agreements – and all others – because they immediately guarantee all the money. The bonds – paid once by the insurer – are properly executed, authorized, issued and delivered by the issuer to the insurer. After the issuer delivers the bonds to the insurer, the insurer will put the bonds on the market at the price and yield of the bond purchase agreement and investors will purchase the bonds from the insurer. The insurer takes the proceeds of this sale and makes a profit based on the difference between the price at which it purchased the issuer`s bonds and the price at which it sells the bonds to fixed-rate investors. The insurer in the event of a firm commitment will often insist on an exit clause that will exempt them from the obligation to buy all securities in the event of a deal that affects the quality of the securities. Poor market conditions are generally not an acceptable reason, but significant changes in the company`s business when the market hits a soft fix, or the poor performance of other IPOs are sometimes reasons why underwriter call for the exit clause. In addition, State of Alaska, Department of Revenue, Treasury Division entered into a standby bond purchase agreement with the State Street Bank and the Trust Company, thereby agreeing to the purchase of 2012B Revenue Bonds under certain conditions. A bond purchase agreement (EPS) is a contract that contains certain clauses that are executed on the day of the valuation of the new bond issue.

The terms of an EPS include: The standby sales contract means an agreement between the district and another person under which that person is required to purchase option bonds or fixed loan bonds offered for sale. Although the ability to buy shares below the market price seems to be an advantage of stand-by stuffing, the fact that there are still shares for the insurer suggests a lack of demand for supply. The stand-by-underwriting thus transfers the risk of the company that goes public (the issuer) to the investment bank (the insurer). Because of this additional risk, the insurer`s costs may be higher.