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-Is- <br />There are several reasons for including an early call <br />opportunity in a bond issue: <br />1) In times of erratic or high interest rates the under- <br />writers will be very uneasy about long term bonds. <br />They will require a high rate.on the long term bonds. <br />To protect itself, the issuer will include the option <br />of an early call. If interest rates 15 years in the <br />future are not as high as the underwriter had fore- <br />casted by his bid, the issuer can excercise his option <br />to call (retire) the bonds, and issue new bonds at a <br />lower rate. If the rates are as high, or higher, than <br />the underwriter predicted, the issuer does nothing and <br />the rate that.was bid is the one that is paid. The <br />call feature can be exercised at any interest payment <br />date after the initial call date. Therefore, the <br />issuer has the opportunity to review the situation <br />every six months. <br />2) Several years after the bonds are sold, the issuer may <br />wish to utilize the same tax or revenue base for <br />additional debt. Both the called bonds and the new <br />improvement will be financed from a second issue which <br />carries a retirement schedule farther into the future <br />than the initial issue did. <br />3) An additional reason is to eliminate restrictive <br />clauses in the bond indenture. In order to provide <br />adequate security for revenue bonds, the bond indenture <br />may call for the establishment and funding of special <br />reserves. As these reserves are funded (usually from <br />the revenues of the utility), the issuer may have <br />better uses for those funds which are segregated in the. <br />reserve. <br />The Metropolitan Council and the MWCC are involved in <br />retiring a number of bond issues which contain early <br />call features. All of the three issues sold by the <br />Council are so designed. A recapitulation of the <br />dates, principal amount payable (and cancellable) on <br />the call date and the interest saving is shown in Table.' <br />Some of the bonds assumed for retirement by.the MWCC <br />and the Metropolitan Council are also subject to an <br />early call. These are two issues each for Minneapolis . <br />and St. Paul, and all of the remaining issues of the <br />NSSSD and the SSD. The callable amounts and the' <br />premiums shown are as of the first call date for those <br />dates which are still in the future. For those issues <br />whose call feature is currently in effect, the callable <br />amounts and premium are as of March 1, 1981. <br />