Refund

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Refund

To retire existing bond issues through the sale of a new bond issue, usually to reduce the interest rate being paid.

Refund

1. See: Tax refund.

2. The sale price of an asset that the seller may give back to the buyer if the buyer returns the asset.

3. See: Redeem.

4. See: Refunding.

refund

To retire securities with the funds that have been raised through the sale of a new security issue. Refunding usually occurs after a period of falling interest rates when firms issue new debt in order to retire existing debt having high coupon rates of interest. Refunding works to the disadvantage of existing bondholders, who must sell their securities before maturity (usually at a slight premium over face value) when proceeds can only be reinvested at a reduced yield. Also called refinance. See also call provision, nonrefundable, prerefunded bond.