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144a
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144a is an SEC rule that modifies the two year lockup requirement on private placement securities. 144a allows debt or equity private placements to trade to and from “QIGs” or qualified institutional investors with above $100 million of investments. Banks must pass a $25 million minimum net worth test to qualify as QIG for 144a trades. 144a securities are often called “restricted securities.” 144a dramatically increases the liquidity for private placements. The SEC’s 1990 adoption of Rule 144a plowed new fields for expanded private debt markets to something more like the public bond market than strict 144 placements. Unlike what the current Rule 144a allows, private placements had two year lockups until 1990. Many investment banks have dedicated 144a desks or “private placement” trading desks. These 144a desks specialize in issuance and trading of Rule 144a private issuer securities with 144a registration rights. 144a specifies that buyers at issue may buy with intention to trade. 144a exclusions prohibit circumvention: securities that, at private placement issuance "comparable" with other current U.S. listed or NASADAQ securities of the issuer are ineligible Rule 144a resale. Smaller companies without public markets seasoning find Rule 144a attractive: with 144a institutional market liquidity is added without the cost of going public. Larger companies with debt issued to the public find Rule 144a attractive: they can fill in rates and maturity ladders with smaller amounts. Investment banks like 144a availability: 144a securities add flexibility to their issuer funding and investor offerings.
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