Advance Refunding
Advance refunding refinances outstanding bonds more than 90 days before redemption, usually using escrowed proceeds until call or maturity.
Municipal refunding and public finance issuance terms covering current refunding, advance refunding, escrow mechanics, and call timing.
Refunding in public finance means issuing new debt to repay or defease older debt. The analysis depends on timing, call provisions, escrow arrangements, tax status, debt-service savings, and whether the old bonds are redeemed quickly or remain outstanding for more than 90 days.
Start with Current Refunding when refunding bonds are used to redeem prior bonds immediately or within the current-refunding window. Use Advance Refunding when the refunding occurs more than 90 days before redemption and escrowed proceeds support the old bonds until call or maturity.
| Refunding question | What to review |
|---|---|
| Is it current or advance? | Issue date, redemption date, call date, escrow period, and tax certificate. |
| Why refinance? | Present-value debt-service savings, debt-structure change, covenant relief, or budget timing. |
| What happens to old bonds? | Redemption notice, defeasance status, escrow securities, and continuing disclosures. |
| What changes for investors? | Call risk, yield-to-worst, credit source, tax reporting, market price, and liquidity. |
Refunding can reduce issuer borrowing costs, but it can also shorten an investor’s expected holding period, change credit exposure through defeasance, or create tax and reinvestment questions. Always tie the term to the official statement, advance refunding document when applicable, call notice, escrow agreement, and current disclosures.
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Advance refunding refinances outstanding bonds more than 90 days before redemption, usually using escrowed proceeds until call or maturity.
Current refunding refinances outstanding bonds when the prior bonds are redeemed immediately or within the current-refunding window.