VRDB


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VRDB

Variable-Rate Demand Note

A debt security that a holder may require the issuer to redeem before maturity. When this occurs, the issuer must pay par to the holder, and the holder loses any future coupon payments that he/she might otherwise have been due. An advantage to a variable-rate demand note from the holder's standpoint is the fact that the holder may reinvest the par value in a new bond in a time of rising interest rates. This protects the holder from certain types of interest rate risk.

Variable-rate demand notes come in two main forms. The first allows the holder to demand redemption on any of several days throughout the life of the bond, while the second only allows this on one particular day. Variable rate demand notes are also known as variable rate demand obligations, option tender bonds, or put bonds. In Canada, the most common term is a retractable bond.
References in periodicals archive ?
Despite the increased liquidity risk, all recent window VRDB issuances have been oversubscribed.
Window VRDBs, first issued in 2009, are designed to offer MMFs an alternative to invest in a high credit quality instrument backed by the issuer-provided liquidity rather than a third-party financial institution.
Of the $480 million of VRDBs, $380 million are supported by letters of credit (LOC) and $100 million will be supported by self liquidity (see below).
7 million are VRDBs with a letter of credit from Bank of America, $260.
Proceeds of the fixed-rate series 2012A bonds will be used to refinance and amortize approximately $48 million of NGF's $108 million of outstanding series 2008 VRDBs that currently have a bullet maturity payment due in fiscal 2038.
At March 31, 2012, WH had approximately $60 million of VRDBs supported by LOCs: $22 million with PNC Bank and $38 million with Wells Fargo.
4 million was 100% VRDBs and management was evaluating several financing options to address its letter of credit renewal risks.
Due to the structure of the MHEFA series A VRDBs and UMBA series 2011-2 WINDOWS VRDBs (expected to be issued in May 2011), UMass will have at least several months of notice before being required to provide internal liquidity support.