by Kirsten Moore, Cooperative Services Director
In both the General Manager’s report and the article on page 16-17, we share exciting updates about the upcoming expansion of Willy West. It is because of your support, as Owners, as loyal shoppers, and as voters and voices in our Co-op, that this expansion can become reality.
Another way that our Owners can support this expansion is through participation in our Willy West Expansion Bond Drive. Loaning the Co-op money to support our growth is a tradition among our Owners. We used Owner Bond purchases to support opening the Co-op in 1974, moving to Willy East’s current location in 1999, opening Willy West in 2010 and Willy North in 2016. To date, all Bonds for West’s opening have now been paid back with interest to Owners who purchased those Bonds and we expect all Willy North Bonds to be paid back to Owners on time as well.
Bonds for Willy West’s expansion will help pay for the costs associated with expanding Willy West, including construction costs, furniture, fixtures, equipment, and professional services.The Co-op will use cash reserves to fund operating items such as, inventory, holding site costs, and promotion costs. By raising money through Owner Bonds, the Co-op is able to maintain cash reserves for operating support and contingency.
What are Owner Bonds?
Bonds are an IOU from the Co-op that Owners can purchase. When a Co-op Owner purchases a Bond, the Co-op is borrowing the money used to make that purchase for a limited time to complete a specific project. When the time’s up, the Co-op pays back the Bond, with a stated rate of interest. Bonds are a great way to lend support to Co-op capital projects and participate economically in the Co-op’s future.
$600,000 in Bonds by April 30th
This Fiscal Year, we are seeking to raise at least $600,000 by April 30th, 2018 to support Willy West’s expansion, and we are capping the total Bonds available at $800,000. A deadline of April 30th allows for us to know how much of the project will be financed by Owners, and how much we will also need to borrow from a credit union.
West Expansion Bond Rates
Owners may buy Bonds for $500 each, and each individual (or nonprofit or cooperative entity) that is an a Co-op Owner may purchase up to $50,000 in Owner Bonds.
The longer we are allowed to borrow an Owner’s money, the more interest the Co-op will pay when we pay the money back. We base our interest rates on the current market. Our goal is to sell Bonds with interest rates for Owners that are better than investing short term, such as in a Certificate of Deposit at a bank, and are better for the Co-op than the rate of interest we would pay a bank for a traditional capital loan. These are the rates for the West Expansion Bonds (see chart on this page).
How Do Bonds Work?
The IOUs we issue for Owner Bond purchases are “zero-coupon.” That means that all of the money we borrowed from the Owner, and the stated rate of interest, will be paid at the end of the Bond term, at maturity. Interest on zero-coupon Bonds is taxable annually. When you purchase a Bond, you sign an agreement with us to allow us to borrow the money for the stated amount of time, and pay the money back at the stated rate of interest.
Bonds involve risk, and should only be purchased by Owners who have determined that it is in their best interest to support the growth of the Co-op. While we have kept our agreement to pay back all Bonds purchased in the past, future performance is a projection, and so there is no absolute guarantee of success. Bonds are unsecured and they are also subordinate to the claims of all other creditors.
Owners with Bonds may request that the Co-op pay the money back earlier with sixty days written notice, and with board approval, the Co-op can pay the money back early minus the value of one year’s interest. The Co-op may also “call Bonds,” meaning that we can pay back our Owners who purchased Bonds prior to a Bond’s maturity, if the Board decides paying back Owners early is in the best interest of the Co-op.
How to Purchase a Bond
Owners interested in purchasing Bonds must:
•Be a resident of the State of Wisconsin at the time of purchase. You will be asked to show and photocopy a valid government-issued ID as well as complete an IRS Form W9 at the time of purchase. The IRS Form does ask for your Social Security Number.
•Be an Owner who is invested-in-full. That means that you have made all of your equity payments to the Co-op for your Ownership type ($56 total for an individual, $91 total for a household, cooperative, or nonprofit).
•Schedule an appointment. You may call any of our Co-op retail locations to make an appointment (Willy West: 608-284-7800; East: 608-251-6776; Willy North: 608-471-4422). Appointments to purchase Bonds can be made at our Central Office or Willy West. We will start accepting appointments on January 15th.
•Pay for the Bond purchase with check or money order. Bonds can only be issued to the individuals or specific cooperative or nonprofit businesses listed on the Owner contract. We do not sell Bonds to other businesses, trusts, or entities.
Thank You For Supporting Our Growth!
The Co-op is owned by the customers who invest in our business, and when you become an Owner and continue to patronize us as a loyal shopper, you are supporting your local business and helping the Co-op thrive and support our community. Our growth is because of you,and we are so pleased to be in a position to update our second store and expand Willy West to better serve your needs. Thank you to all of the previous Bondholders who participated in previous capital campaigns, and most recently to those of you who helped open Willy West and Willy North. Bonds gave us the economic boosts we needed to make those two stores another successful part of your Co-op. We look forward to continuing to do business with our community, and we are excited to see West’s expansion through by working together!
Bond A:
For each $500 Bond purchased the Co-op will pay $538.45 at the end of 3 years.
Features:
Maturity: 3 years
Interest rate: 2.5%
Type: Zero coupon
Interest compounded: Annually
Available purchase amount: Any $500 incrementup to $50,000.
Bond B:
For each $500 Bond purchased, the Co-op will pay $579.64 at the end of 5 years.
Features:
Maturity: 5 years
Interest rate: 3.0%
Type: Zero coupon
Interest compounded: Annually
Available purchase amount: Any $500 increment up to $50,000.
Bond C:
For each $500 Bond purchased, the Co-op will pay $636.14 at the end of 7 years.
Features:
Maturity: 7 years
Interest rate: 3.5%
Type: Zero coupon
Interest compounded: Annually
Available purchase amount: Any $500 increment up to $50,000.
