Variable-rate demand note

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Variable-rate demand note

A note that is payable on demand and bears interest tied to a money market rate.

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 ?
The Short-Term 'F1+' rating on the series 2000 and 2006 VRDBs is supported by a standby bond purchase agreement (SBPA) provided by the Northern Trust Company (rated 'AA-'/'F1+').
In particular, the outlook revision affected Lucas County, Ohio's series 2008D fixed-rate revenue bonds, the underlying rating (SPUR) on the county's series 2008A and B variable-rate demand bonds (VRDBs), and the SPUR on Lenawee County Hospital Finance Authority, Michigan's series 2008C VRDBs.
Key credit concerns include potential put risk related to its series 2009 VRDBs and recent challenges in profitability.
25x coverage of the outstanding VRDBs required under Fitch's Criteria for Assigning Short-Term Ratings Based on Self Liquidity.
36x coverage of the maximum authorized CP amount plus outstanding VRDBs.
9, 2012, press release (Fitch to Take Various Rating Actions on CPCFA VRDBs Series 01A, 06A and 07A), is effective today (Nov.
The 'F1+' rating is based on the availability of highly liquid, highly rated securities to cover potential maximum liquidity demands presented by Vanderbilt's outstanding VRDBs and CP notes.
28, 2012, press release (Fitch to Take Rtg Actions on $250MM Metropolitan Transp Auth Transp Rev VRDBs, Ser 2005E), is effective today (Oct.
1, 2012 press release (Fitch to Take Various Ratings Actions on the City of Chicago GO VRDBs Series 2002 B-3 and B-5), is effective today (Oct.
The maintenance of a strong balance sheet is important due to Deerfield's large debt load and put risk associated with the series 2008B VRDBs.
1 million series 1992 bonds and a fixed rate direct placement for its $40 million series 1997B VRDBs.
The VRDBs are supported by a letter of credit from US Bank that expires in August 2013.