FNFA receives the borrowing requests from First Nations that have sent in applications to become Borrowing Members. Click here for the forms and documents you need. Subject to market and economic conditions, the FNFA batches the requests and authorizes the issue and sale of securities in an amount sufficient to meet the requests. Securities of the FNFA will then be issued at such rates and pursuant to such terms and conditions and in such a markets and currencies as the Board of Directors of the FNFA determines to be in the best interests of the Borrowing Members.
Following the authorization to proceed with an issue, the FNFA will meet with its syndicate of underwriters who will advise on the market and indicate the willingness of the markets to buy the issue. When the time is right, the FNFA, through a lead underwriter will go to market. It is expected that the FNFA issues will be bought primarily by institutional investors in Canada.
Relending Process: Once the issue has been sold through the syndicate, the proceeds of the sale will be deposited into the account managed by the FNFA and the proceeds re-loaned to the participating Borrowing Members participating in that debt issue. During the life of an issue the cash collected from Borrowing Members will be adequate to cover FNFA’s liability to bond holders.
Sinking Funds: The FNFA policy is to relend on a sinking fund basis. A sinking fund is where the principal and interest payments each year remain constant by the Borrowing Member. The sinking fund consists of the principal portion of the loan payments collected from the borrowers and not yet due to the bond holder until loan maturity. These principal monies are invested to the credit of the Borrowing Member and used to cover the loan due at maturity. The interest payments collected from the Borrowing Members are paid directly to the bond holders. Borrowing Members will receive regular statements on each debt issue in which they are participating so the accounting records are complete.
Debt Reserve Fund: In addition to the sinking fund, the Debt Reserve Fund (DRF) is established to assure sufficient funds are available to meet the principal interest or sinking fund payments due to its obligations. Each Borrowing Member receiving loan proceeds from a debenture issue will, as a condition of participating, contribute an amount equal to 5% of the total amount borrowed into the DRF. The DRF is critical to FNFA achieving an investment-grade credit rating, which means lower interest rates for the Borrowing Members. This amount will be invested to the credit of the Borrowing Member and will be returned to the Borrowing Member at maturity.