Since 1985, issuers had been permitted a single advance refunding
before the call date of the bond.
New York: Issue: Water and Sewer Refunding
Revenue Bonds, Series 2016A; Rating: Aa2; Sale Amount: $18,875,000; Expected Sale Date: 03-16-2016; Rating Description: Revenue: Government Enterprise
One such practice is advance refunding
. Richard Green, Yuhang Xing, and I show that advance refunding
led to $7 to $9 billion of lost value over 1995 to 2013.
In a refunding
, the money from the newly issued municipal bond will enable payment of the debt service on an issuer's older, higher yielding bonds, as explained later.
The company said that the decline in the first quarter 2010 earned premiums after refundings
primarily reflects the reduction in ongoing earnings due to the commutation of treaties with three of its ceding companies during 2009.
He structured such deals as a $300 million floating-to-fixed interest rate swap for a District of Columbia General Obligation refunding
bond issue, a complicated transaction involving the refunding
of more than 200 separate loan obligations; and a $148 million floating-to-fixed rate swap for the City of Philadelphia, the first done by a major city government, in 1990.
"We saw a tremendous growth in refunding
volume during the first six months of the year as a low interest rate environment made it economically feasible to refund higher outstanding coupon debt," said association vice president Andy Nybo.
Kraus (1983) argues that the textbook call policy is optimal when there are no issuance costs associated with refunding
Specifically, the new statement requires that, for current refundings
and advance refundings
resulting in debt defeasance reported by proprietary activities, the difference between the reacquisition price and the net carrying amount of the old debt be deferred and amortized as a component of interest expense in a systematic and rational manner over the remaining life of either the old or new debt, whichever is shorter.
Municipal bond issuance rose 68.3 percent to $75.9 billion in the first quarter of 1998 from $45.1 billion in the year ago period on sharp volume gains in the refunding
and new capital sectors, according to a report from The Bond Market Association.
The Governmental Accounting Standards Board issued an exposure draft specifying how state and local governments should account for current refundings
or advance refundings
that result in defeasance of debt reported in proprietary funds.
Since the summer of 1996, state and local government issuers have faced the prospect of being compelled to enter into closing agreements with the Internal Revenue Service (IRS) to protect the tax-exempt status of advance refundings
because of possible overpricing by bond underwriters - yield burning - in connection with the investment of the advance refunding