What role does a conduit borrower play in bond issuance?

In the context of bond issuance, a conduit borrower typically plays the role of an intermediary that facilitates the borrowing process. When a conduit borrower agrees to repay the issuer, it establishes an obligation to use the funds raised through the bonds for a specified purpose, usually related to a project or investment. This repayment agreement is crucial because it assures bondholders that there is a responsible party committed to repaying the debt, thereby enhancing the overall credibility and security of the bond offering.

This role is particularly prominent in situations such as municipal bonds, where a conduit borrower often refers to a non-profit organization or other designated entity that borrows money on behalf of a project that may not have the capacity to issue bonds directly. By doing so, conduit borrowers help to streamline the process and often provide access to lower borrowing costs due to the creditworthiness associated with the bond issuer.

Other options tend to represent functions that are either not central to the role of a conduit borrower or are responsibilities held by different parties involved in the bond issuance process. Therefore, in the bond issuance structure, the agreement to repay the issuer is a defining characteristic of a conduit borrower's role.