3.6.2. VRDO Notification and Reporting Requirements
Recall that variable-rate demand obligations are floating-rate securities that have a nominal long-term maturity, but whose interest rates are periodically reset. Bondholders have the option to put the issue back to the issuer’s trustee or tender agent at any time, typically with a specified notification period.
Bonds that reset interest rates on a daily basis require same-day notification. Weekly resets require seven days’ notification. VRDOs with monthly or quarterly tender dates also require seven days’ notice, but may only be tendered on the specified reset date, usually the last day of the month or quarter.
The holder of a VRDO will give notice to the issuer’s tender agent, who will notify a remarketing agent responsible for reselling the security to new investors. The remarketing agent is a municipal securities dealer who has been hired by the issuer to determine the new interest rates for each reset date and to remarket the tendered bonds.
To ensure that holders may liquidate their positions even if the remarketing agent is unable to resell the bonds, VRDOs are normally backed by some sort of credit enhancement. Known as a liquidity facility, t