Prerefunding

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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
In addition, Fitch Ratings has withdrawn its ratings for the following bonds due to prerefunding activity: --Olivenhain Municipal Water District Financing Authority (CA) (Water Treatment Project) water revenue bonds series 2009 (prerefunded maturities only - 67088SAK8, 67088SAL6, 67088SAM4, 67088SAN2, 67088SAP7, 67088SAQ5, 67088SAR3, 67088SAS1, 67088SAT9, 67088SAU6, 67088SAX0, 67088SBA9, 67088SBF8).
Additionally, Fitch has withdrawn its ratings on the following bonds due to prerefunding activity:
In addition, Fitch has withdrawn its ratings for the following bonds due to prerefunding activity:
Austin: Fitch Ratings has withdrawn its ratings on the following bonds due to prerefunding activity:
New York: Fitch Ratings has withdrawn its ratings for the following bonds due to prerefunding activity:
Fitch has withdrawn its ratings for the following county bonds due to prerefunding activity:
Fitch Ratings has withdrawn its ratings on the following district bonds due to prerefunding activity:
Securities and Exchange Commission, withdrew its ratings for the following bonds due to prerefunding activity.