Printer Friendly
Dictionary, Encyclopedia and Thesaurus - The Free Dictionary
1,782,459,724 visitors served.
forum mailing list For webmasters
?
New: Language forums
Dictionary/
thesaurus
Medical
dictionary
Legal
dictionary
Financial
dictionary
Acronyms
 
Idioms
Encyclopedia
Wikipedia
encyclopedia
?

Prerefunding

    0.01 sec.
Prerefunding
Procedure of floating a second bond at a lower interest rate in order to pay off the first bond at the first call date and to reduce overall borrowing costs.

prerefunding
The placing of funds with a trustee in order to retire a bond issue as a liability before the call date. Also called advance refunding. See also arbitrage bond.

Prerefunding
The act or practice of a company issuing a second bond with a lower coupon rate in order to pay off a previously issued callable bond. In this circumstance, the callable bond is referred to as a prerefunded bond. Companies engage in prerefunding when more favorable interest rates become available, reducing the company's overall borrowing costs.

Prerefunding. Prerefunding may occur when a corporation plans to redeem a callable bond before its maturity date. If that's the case, the bond is identified as a pre-refunded bond.

To prerefund, the issuer sells a second bond with a longer maturity or a lower coupon rate, or both, and invests the amount it raises in US Treasury notes or other securities that are essentially free of default risk.

The specific securities are typically chosen because their maturity dates correspond to the date on which the company will use the money to redeem the first bond.



How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content.
?Page tools
Printer friendly
Cite / link
Email
Feedback
Add definition
? Mentioned in
 
Financial browser? ? Full browser
 
 
Financial Dictionary
?

Disclaimer | Privacy policy | Feedback | Copyright © 2009 Farlex, Inc.
All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional. Terms of Use.