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Advanced refunding

• Is the technique of replacing one bond issue by another. This typically occurs when a municipality can borrow at more favorable terms than the outstanding issue. The new issue's proceeds are used to purchase government obligations which are held in escrow. The income and/or appreciation of these government securities is then used to service the outstanding debt. The escrow may be held until the first call date or maturity of the initial bond issue. If the escrowed funds retire the original issue at the first call date then the issue is pre-refunded. This retirement and replacement process of debt is also known as defeasance.

 
 

Follow this link for all the terms related to fund.

 
 Embedded terms in definition
 Appreciation
Bond
Borrow
Call date
Call
Debt
Defeasance
Escrow
First call
Government securities
Held
Income
Issue
Maturity
New issue
Purchase
Retire
Securities
 
 Related Terms
 Bond refunding decision
High coupon bond refunding
Low coupon bond refunding
Net advantage of refunding
Refunding
Stopping curve refunding rate

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