Advance Refunding
If a primary offering is being used to advance refund outstanding municipal securities and an advance refunding document is prepared, then the underwriter is required to do the following no later than five days after the closing date:
- • Submit the advance refunding document to EMMA
- • Submit all required information related to the advance refunding document in Form G-32
Advance refunding is essentially a refinancing process where the issuer of refunding bonds seeks to lower its interest payments by paying off previously issued bonds with newly issued bonds. The new issues have a lower interest rate, allowing for savings to the issuer. An issuer may also advance refund existing bonds in order to be released from legal requirements associated with the original bonds. The existing bonds are not paid off immediately in such an arrangement, however. The proceeds from the new refunding bonds are placed into an escrow account and paid out on a predetermined schedule. The advance refunding document usually refers to the refunding escrow trust agreement or an equivalent document.