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advance refunding |
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Advance refunding In the context of municipal bonds, refers to the sale of new bonds (the refunding issue) before the first call date of old bonds (the issue to be refunded). The refunding issue usually specifies a rate lower than the issue to be refunded, and the proceeds are invested, usually in government securities, until the higher-rate bonds become callable. See: Refunding escrow deposits.
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transaction where the new bond issue has a fixed interest rate, LIBOR-based advance refunding transactions have an underlying variable rate yield. Yield Reduction Payments on Certain Advance Refunding Escrows. The proposal would not allow issuers to have an advance refunding opportunity on future bonds, thus eliminating a powerful tool used by state and local governments to minimize financing costs. |
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