Series 82: 3.3.6.2. Refunding Of Bonds

3.3.6.2. Refunding of Bonds

The process of retiring outstanding bonds and issuing new ones is called refunding. Bond refunding may or may not involve an early redemption. A company may issue new bonds, called refunding bonds, whose proceeds have the sole purpose of being used to retire an existing issue, the refunded bonds. When an issuer uses the proceeds from the refunding bonds to retire the old debt immediately, subject to the bond’s call provisions, it is called a current refunding.

However, refunding does not necessarily mean that the old debt must immediately be paid off by the new debt. A refunding in which the old issue remains outstanding for a period longer than 90 days after the issua