EXTRAS—Extendable Rate Adjustable Securities are a proprietary Ziegler product. We have used this product in a number of different value-added ways: as part of temporary debt (to be repaid with entry fees on a new campus or expansion), in lieu of traditional variable-rate debt, and layered behind fixed-rate bonds in the “back end” of amortization.
EXTRAS offer a long-term amortization, up to 35 years, with a three- to 10-year interest rate reset. EXTRAS can be structured with either a fixed reset term or with the option to change the reset term on each reset date. When the interest rate is reset, the investor has the option to “put” the bonds back to the borrower for refunding redemption.
Unlike other tender-option bonds, Ziegler markets EXTRASwithout a bank letter of credit. As a result, the investor can only tender the bonds if money in excess of prudent reserves is available to the borrower. Thus, the investor takes on the risk rather than the borrower. This “soft put” has provided substantial interest rate savings and flexibility to our clients. Since the inception of this unique product, we’ve done over $1 billion in volume.