Variable Rate Demand Bonds Update

With the bond market in turmoil during the last week, issuers and borrowers may have had flashbacks to the dark days of the post-2008 world when interest rates on variable rate demand bonds and auction rate securities were vulnerable to high rate resets. In response to the disruption caused by COVID-19, the National Association of Bond Lawyers next week plans to request federal regulatory intervention to return to the temporary rules put in place by IRS Notice 2008-41 during the 2008-2009 financial crisis that enabled issuers of tax-exempt bonds to purchase and hold outstanding bonds for a specified period of days in order to avoid high resets of interest rates. Conduit borrowers do not have the same federal tax limitations, but existing document provisions need to be examined for solutions to other potential prohibitions, including preference proof payments.

Please contact Amy Corsaro, Philip Genetos, David Nie, Susan Price or Tyler Kalachnik with any questions. Ice Miller is here to help.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.