Private Placements are securities, such as common stock,
warrants, bonds, not sold via a public offering but privately to a
selected number of investors. In the United States, these
securities do not have to be registered with the Securities and
Exchange Commission (SEC), as they are sold directly to the private
market and not to the general public. Therefore, they do not have
to comply with the requirements set by the Securities Act of 1933.
In this paper, we will focus on the debt securities issued in
the private placement market.
Private Placement Debt
Debt issued via a private placement does not require a public
credit rating. However, the National Association of Insurance
Commissioners (NAIC) assigns a private credit designation, if the
private placement instrument is held by an insurance company. As of
2015, 93.4% of the private placement securities held by insurers
were investment grade (i.e. NAIC rating 1 or 2).
