Crossover Refunding

AAA

DEFINITION of 'Crossover Refunding'

A local government's issuance of new municipal bonds (called refunding bonds) in which the proceeds of the refunding bonds are placed in escrow and used to make debt service payments on the refunding bonds until the call date of the original bonds. At that point, the refunding bond proceeds cross over and are used to pay the principal and the call premium, in order to extinguish the original bonds.

INVESTOPEDIA EXPLAINS 'Crossover Refunding'

When 90 days or fewer are left in the original bonds' terms, the refunding is called "current". When more than 90 days remain, the refunding is called "advance". Alternatives to a crossover refunding include net cash refunding, which is more common, and full cash or gross refunding, which is less common.


A locality might decide to refund its bonds in order to get a better interest rate, to get better debt covenants or to obtain a better debt service schedule.

RELATED TERMS
  1. Indenture

    A legal and binding contract between a bond issuer and the bondholders. ...
  2. Municipal Bond Arbitrage

    A strategy that consists of building a portfolio of tax-exempt ...
  3. Bond Valuation

    A technique for determining the fair value of a particular bond. ...
  4. Cash Flow

    1. A revenue or expense stream that changes a cash account over ...
  5. Covenant

    A promise in an indenture, or any other formal debt agreement, ...
  6. Bond

    A debt investment in which an investor loans money to an entity ...
Related Articles
  1. The Basics Of Municipal Bonds
    Bonds & Fixed Income

    The Basics Of Municipal Bonds

  2. Avoid Tricky Tax Issues On Municipal ...
    Taxes

    Avoid Tricky Tax Issues On Municipal ...

  3. Weighing The Tax Benefits Of Municipal ...
    Taxes

    Weighing The Tax Benefits Of Municipal ...

  4. 8 Ways To Lose Money On Bonds
    Investing Basics

    8 Ways To Lose Money On Bonds

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center