[Villages Kahuna]

As a retired banker, here's what I can conclude from this situation.

• First, I wonder who FMS Bonds.com is? They say they are a registered broker-dealer, "registered" meaning recognized by the SEC. They do mention membership in a couple of well-known industry associations on their website. They appear to have some physical presence in Boca Raton, although that could be nothing more than a mail box.
  
• The broker-dealer's unaudited 2007 year-end financial statement says they only have assets of a little more than $100 million. This is obviously a small broker-dealer. They sure can't carry much inventory for sale with assets on only $100 million.
  
• How they acquired the bonds for re-sale is a curious question. It's almost certain that the CDD 6 bonds were initially "privately placed" by the bond underwriter. I might have guessed that a bank, maybe even Citizens First, might have been the purchaser of the original issue. But because the issue was almost certainly a small one, maybe FMS Bonds.com was the buyer of the initial offering. Their website says they have a little less than $4 million of the bonds in inventory, so maybe they were the original buyer of the CDD 6 bond issuance.
  
• The bonds were never submitted for a rating by any of the rating agencies. First, the financial strength of CDD 6 is almost certainly not substantial enough to earn anything more than a "junk" rating or even an official "unrated" designation. Even if the CDD could have gotten a rating, which is unlikely, that step is extraordinarily expensive for a small issue. Of course, it isn't needed if the bonds are purchased by a single private party, who presumably knows and understands the credit-worthiness of the CDD.
  
• Actually, the buyer of these bonds would be taking somewhat of a multiple credit risk if they bought these bonds according to the terms of the offer. Note that there would be no delivery of the physical bonds to the buyer. It would be a "book entry" on the books of FMS Bonds.com. That means that an investor would be taking the risk that the issuer (CDD 6) wouldn't keep scheduled payments current, but would also be betting on the continued financial solvency of FMS Bonds.com. They would be receiving the payments from CDD 6 and passing them on to the buyer. FMS says that their accounts are insured to a reasonable level, but an insolvency on the part of the broker-dealer would still create a bit of a sticky situation.
  
• These bonds were probably initially sold last year. They appear to be ten-year bonds with a final maturity in 2017. The are "callable" at any time to permit their early repayment should funds become available to the CDD to do so. This feature suggests that these may be the bonds sold to finance the infrastructure improvements within CDD 6 and are callable to permit the use of funds from homeowners who pay off their individaul property bonds to be applied to retirement of the bonds issued.
  
• The bonds have a "coupon" interest rate of 5.25% on the original issue price of 100. The dealer is now offering the bonds for sale at a discount from the original offering price, currently 93.633. The decline in the face value of the bonds is a calculation that produces an interest rate ("yield") that is an attempt to keep the bonds competitive with other bonds being sold in the market. In this case, the yield on these bonds would be 5.7% to the buyer if the bonds were not called before maturity. In today's market, a tax-free rate of 5.7%--actually a 6.84% rate if a buyer was in the 20% tax bracket--isn't particularly attractive for an unrated bond. There are plenty of bonds currently available with "investment grade" ratings that are yielding close to 8% on a taxable basis. For that same buyer in the 20% tax bracket, that would yield 6.4%, but for a substantially higher quality bond.

My personal bottom line on these bonds and this broker-dealer is that I think I can make as much money with far less risk with other fixed income securities. Beyond that, I'd feel a lot more comfortable calling my broker at Merrill Lynch to ask questions as opposed to some unknown in a bucket shop at an 800 number which may or may not be located in Boca Raton or making a several thousand dollar investment on line. I'd also be a lot more comfortable relying on a large bank or brokerage firm passing along the scheduled interest and principal payments as opposed to some online broker-dealer who doesn't even list an address or name to call.

I hope this helps.