Use of Bond Proceeds by a School District - Refundings/Refinancings

December 23, 2014 by Enzo Incandela, Associate | James M. Snyder, Partner

Like a homeowner who refinances their mortgage when interest rates drop, a school district with outstanding debt can issue refunding bonds in order to take advantage of lower rates. Refunding bonds can also be issued to avoid default or restrictive debt burden. A refinancing can be done as a current refunding, which means the old bonds are called or mature within 90 days of the issuance of the refunding bonds, or an advance refunding (limited to one occurrence) where the old bonds are called on a specified call date and proceeds of the new refunding bonds are typically held in an escrow account until such later call date at least 90 days after the issuance of the refunding bonds. Refundings generally do not need to satisfy direct or backdoor referendum requirements.

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