Variable rate debt will be comprised of mandatory tender bonds, floating-rate notes, Windows, and variable-rate demand obligation
This guidance applies to auction rate securities, as well as variable-rate demand obligation
bonds or any other variable-rate debt instruments.
Wells Fargo & Co (WFC) has been dismissed as a defendant in litigation brought by the cities of Philadelphia and Baltimore, which are alleging that large banks are conspiring to inflate interest rates for variable-rate demand obligations
, a form of tax-exempt bond, Reuters reports.
Public Finance Variable-Rate Demand Obligations
and Commercial Paper Issued with External Liquidity Support Rating Criteria', dated Jan.
Short-term ratings on enhanced municipal bonds may be lower than those of their liquidity providers, as discussed in Fitch's 'Rating Guidelines for Variable-Rate Demand Obligations
Issued with External Liquidity Support', dated Feb.
In addition, some obligors' debt profiles include liquidity risk exposure tied to variable-rate demand obligations
, alternative financing products, and other debt instruments.
The company said that the 'A' underlying rating was also assigned to the airport's planned USD87.7m series 2005C1-C2 variable-rate demand obligations
, and Fitch affirmed the 'A' rating for the city's approximately USD3.6bn of outstanding airport revenue bonds.
Also increasing in prominence during the 1980s were tax-exempt commercial paper and variable-rate demand obligations
, These complex financings benefit from the extensive presale and marketing available when sold through negotiation.
Based on these factors, variable-rate demand obligations
(VRDOs) were developed that allow nominally long-term debt to behave (and be priced) as if it were short-term paper, offering benefits to both investor and issuer.
The BMA Index is a weekly reset benchmark index that is based on the average interest rate on approximately 650 money market eligible non-AMT tax-exempt weekly reset variable-rate demand obligations
Floating- to fixed-rate swaps have been used to hedge interest rate risk on variable-rate demand obligations
, or VRDOs; lock in fixed interest rates on refunding bonds that will be issued in the future; or take advantage of opportunities to obtain fixed swap rates that are lower than comparable fixed bond rates.
As of March 31, 2018, the program had $6.8 million in outstanding variable-rate demand obligations
(VRDOs), approximately 3% of all program debt.