Unwind after 7-Year NMTC Compliance Period: $10 Million NMTC Financing
Forgiven NMTC Loan to a Single Borrower
With respect to the Forgiven NMTC Loan to a single Borrower, at the end of the 7-Year NMTC compliance period, the NMTC financing unwinds as follows:
- the NMTC Investor sells its 100% ownership interest in the Investment Fund to an affiliate of the Borrower/QALICB for a nominal amount; and
- the Allocatee sells its 0.01% managing interest in the CDE to such affiliate of the Borrower/QALICB for a nominal amount.
The effects of the unwind are:
- the  Forgiven NMTC Loan/QLICI becomes an intercompany loan (i.e., effectively forgiven); and
- the Senior NMTC Loan/QLICI also becomes an intercompany loan and, depending on the terms of the Leverage Loans, are: (a) amortized to maturity; (b) refinanced; (c) paid off; or (d) effectively forgiven if the Leverage Lender is an affiliate of the Borrower/QALICB (which used its own funds; federal, state and local subsidies; and up to 2 yearâs of certain prior expenditures).
The following flowcharts illustrate the âunwindâ transactions and the post-âunwindâ structuring of a NMTC financing to a single Borrower.
Unwind after 7-Year NMTC Compliance Period: Forgiven NMTC Loan to a Single Borrower (âUnwindâ Transactions)
Unwind after 7-Year NMTC Compliance Period: Forgiven NMTC Loan to a Single Borrower (Post âUnwindâ)
Non-Forgiven NMTC Loans to a Pool of Borrowers
With respect to the Non-Forgiven Loans to a pool of Borrowers, using our $10 million example, at the end of the 7-year NMTC compliance period, the NMTC financing unwinds among the NMTC Investor, the Allocate and the Leverage Lender without any involvement from an affiliate of the Borrower (unlike the unwind after the 7-year NMTC compliance period involving the Forgiven Loan to a single Borrower).
The effects of the unwind are:
- the Non-Forgiven Loan begins to amortize through its up to 40-year maturity date; and
- if applicable, a small portion of the Non-Forgiven Loan is forgiven (or a small Forgiven Loan) at such time or thereafter.
Although the typical NMTC financing structure is quite complex based on all of the sources of funds, the fundamental economics and initial structure of any NMTC financing is illustrated in the following link:
For a determination of whether the Forgiven NMTC Loan or the Non-Forgiven Loan is available to a Borrower based on the âForgiven NMTC Loan Testâ and the sizing of the NMTC financing, please click on the following link.
Please click the following link to watch our pre-recorded webinar:
To apply as a CDE for NMTC for a NMTC Allocation Award, please click the following link: