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Private Placements without an Agent

Data are not available on the volume of private placements issued without an agent's assistance, but it is probably substantial. Estimates by major private market lenders suggest that as much as one-third of total private issuance is done without an agent. In most cases, such issues are sold by a company that has previously borrowed in the private market and sold to investors that bought parts of the previous placements.

In such cases, some of the services that agents provide are not relevant. For example, due diligence by the agent adds little or no value, as monitoring by the lenders since the previous issuance has kept them informed about the borrower. Locating appropriate potential lenders is also virtually costless for the borrower. Apparently the other services provided by the agent-notably, help in negotiating terms-are thought by some issuers not to be worth the fee. Many repeat borrowers do use an agent, however, so either circumstances or opinions differ across repeat borrowers.

Agent Operations under Rule 144A

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