S7C14

Front 1

Tax anticipation notes

Back 1

A TAN is used to raise money which will be paid off with the tax receipts in the near future.

Front 2

Zero Coupon bonds

Back 2

Zero coupon bonds are bonds sold at a deep discount which mature at face value.

Front 3

Legal opinion

Back 3

The legal opinion is a statement from a reputable independent Law Firm hired by the issuer pertaining to the tax exempt status of Municipal bonds.

Front 4

Entrance Covenant (catastrophic or extraordinary call provision)

Back 4

A covenant that requires the adequate Insurance being maintained on the facility to protect investors from damage or destruction of the facility.

Front 5

With a grade of BBB or higher, how would a bond be classified?

Back 5

Investment grade

Front 6

An investor would buy what term bonds if he anticipates Rising interest rates?

Back 6

An investor would buy short-term bonds if he anticipates Rising interest rates.

Front 7

Indenture / Bond indenture/trust indenture

Back 7

A bonds indenture describes the rights and duties of the municipality and the trustee.

Front 8

Double Barreled Bonds

Back 8

Double barrel bonds are revenue bonds which are also backed by the full faith and credit of a municipality.

Front 9

Lease rental / lease Revenue / leaseback bonds

Back 9

A municipality will form an authority to sell bonds and construct a facility. The Authority then leases the facility back to the city or school district.

Front 10

Pre-refunding and Advanced Refunding

Back 10

The municipality Issues new bonds whose proceeds will be used in the future to pay off existing bonds. The proceeds of the new bonds issued are invested in US government securities until the existing bonds can be redeemed.

Front 11

Build America bonds (BABs)

Back 11

BABs are taxable municipal bonds issued for infrastructure rebuilding. They are fully taxable to investors.

Front 12

What would an analyst consider when determining the credit-worthiness of a revenue Bond?

Back 12

An analyst reviewing creditworthiness of a revenue Bond would review the purpose of the bond issue, competing facilities, coverage ratios and rate covenants.

Front 13

Variable rate municipal bonds

Back 13

Variable rate municipal bonds have interest rates that are periodically recalculated

Front 14

Moral obligation bonds

Back 14

Moral obligation bonds are revenue bonds issued by an authority created by a state or municipality but for which the payment of interest and principles is not a legal obligation to the state or municipality.

Front 15

Feasibility study

Back 15

A study of the feasibility of the bond issuance which determines estimated costs and revenues.

Front 16

Contiguous overlapping debt

Back 16

Contiguous overlapping dead is dead shared by different municipalities sharing the same borders.

Front 17

Overlapping debt

Back 17

Overlapping debt is the debt for which more than one Municipal entity is responsible.

Front 18

Maintenance Covenant

Back 18

A protective Covenant that requires that the facility is maintained in good operating condition.

Front 19

Which type of municipal bond is most sensitive and volatile?

Back 19

Zero coupon municipal bonds are the most sensitive and volatile of all municipal bonds issued.

Front 20

Industrial Development bonds (industrial revenue bonds)

Back 20

The municipality approves the sale of bonds "on behalf of" a company to construct or purchase facilities that are then purchased by or leased to a private user. This enables the company to borrow at tax free rates.

Front 21

How are General obligation bonds secured?

Back 21

General obligation bonds are secured by taxes collected by the municipality. They are not secured by revenues from revenue generating facilities (these would be revenue bonds).

Front 22

Flow of funds - order of payment for a gross revenue pledge

Back 22

1. Bond service account for principal and interest

2. Operation and maintenance fund

3. Debt Service Revenue fund and/or sinking fund

4. Reserve maintenance fund

5. Surplus fund or general fund of the municipality

Front 23

What would an analyst consider when determining the creditworthiness of an issuer for a GO Bond?

Back 23

Outstanding debt, per capita debt, debt to value ratio, debt to property value ratio, character of the economy, tax collection record, property valuation trends, tax rates, unfunded liabilities, operation deficit, attitude of municipality towards debt, population demographics, and budget practices

Front 24

Direct debt

Back 24

Direct debt for which the municipal entity is solely responsible

Front 25

Closed and additional Bond Covenants

Back 25

A covenant which prohibits the sale of additional bonds payable from revenues of the project.

Front 26

Who pays interest and principal on Industrial Development bonds?

Back 26

Interest and principle is payable solely by the company, not the municipality.

Front 27

Special assessment Bond

Back 27

Special assessment bonds are issued by municipalities, where the principal and interest is payable from the assessment on the benefited property, and are classified as Revenue bonds.

Front 28

Financial report Covenant

Back 28

A covenant that requires an audited annual income statement and balance sheet on the facility.

Front 29

With a grade of Ba or lower how would a bond be classified?

Back 29

Speculative grade

Front 30

Advanced refunding

Back 30

With Advanced refunding, the bonds are generally non-callable and are redeemed at the original maturity date.

Front 31

Term bonds

Back 31

Term bonds are bonds that are all issued with the same maturity date.

Front 32

Serial Bonds

Back 32

Serial bonds are bonds issued with staggering maturity dates.

Front 33

Pre-refunding

Back 33

The original issue will be redeemed on the earliest call date.

Front 34

Flow of funds- order of payment for a net revenue pledge

Back 34

1. Operations and maintenance fund

2. Bond service account for principal and interest

3. Debt Service Reserve fund and or sinking fund

4. Reserve maintenance fund

5. Surplus fund or general fund of the municipality

Front 35

Additional Bond Covenants

Back 35

A covenant the regulates the municipalities ability to sell additional funds payable from the revenues of the project.

Front 36

Revenue bonds

Back 36

Revenue bonds are bonds for which the payment of bond interest and principal depends on specific identified sources of revenue such as user charges, lease payments, license fees, or "special" taxes.

Front 37

Bond anticipation notes (BAN)

Back 37

A BAN is used to raise money which will be paid off from the sale of bonds in the future.

Front 38

Repurchase agreement

Back 38

Is an agreement whereby Securities are sold by a firm with the agreement to repurchase them at a later date at an agreed upon price.

Front 39

Refunding bonds

Back 39

Are bonds issued by a municipality, the purpose of which is the payoff existing bonds.

Front 40

Grant anticipation notes (GAN)

Back 40

GANs are grants received by municipalities from the federal government generally from the Federal Transit Authority program for the purchase of buses, trains, ferries, vans and support equipment.

Front 41

Antidiscrimination Covenant

Back 41

A covenant that requires that no discrimination will be practiced in the facilities hiring policies, services provided, or rate changes.

Front 42

Protective Covenants

Back 42

The issuance of revenue bonds is generally accompanied by agreements or covenants in the indenture to do certain things during the life of the bonds, such as maintaining adequate insurance, financial reporting Etc

Front 43

An investor would buy what term bonds if he anticipates declining interest rates?

Back 43

An investor would buy long-term bonds if he anticipates declining interest rates.

Front 44

Qualified legal opinion

Back 44

A qualified opinion specifies that the validity and tax exemption are conditional in some way or dependent on some future event or qualification.

Front 45

Special tax bonds

Back 45

Special tax bonds are bonds that are paid from exercise taxes levied on purchases of certain products such as cigarettes and liquor.

Front 46

Put Bond (tender Bond)

Back 46

A put bond is a feature which allows the holder of the bond to put or redeem the bonds back to the issuer or agent usually at par on certain stated dates.

Front 47

Revenue anticipation notes (RAN)

Back 47

A RAN raises money which will be paid off when certain revenues are realized or received.

Front 48

What are MBIA (Municipal Bond Insurance Association) and AMBAC (American Municipal Bond Assurance Corporation)?

Back 48

These organizations insure municipal bonds against default and guarantee the payment of principal and interest.

Front 49

Limited tax bonds

Back 49

Limited tax bonds are General obligation bonds where the municipality put a statutory limit on the tax rate that may be levied.

Front 50

Sinking fund

Back 50

When required, sinking funds ensure that money is set aside for the Redemption of bond principle at maturity.

Front 51

Refunding/bond repayment

Back 51

Municipalities can refund maturing Bond issues either via cash (saved or from a new bond issue) or via an exchange of new bond issue for the old Bond issue.

Front 52

Municipal Bond

Back 52

Bonds issued by state and local government in today's such as cities, countries, school districts, authorities (transit, Etc) and state.

Front 53

With a grade of Baa or higher, how would a bond be classified?

Back 53

Investment grade

Front 54

Unqualified legal opinion

Back 54

An unqualified opinion is absolute and unconditional. It indicates the bonds are "legal, valid, binding" and qualified as tax-free.

Front 55

Parity bonds

Back 55

Occur when an issue of new bonds have equal claim or rights to Collateral as other bonds that were previously issued.

Front 56

Standard and Poor's/Moody's

Back 56

Credit rating agencies which evaluate the creditworthiness of bond issues, including municipal bonds.

Front 57

General obligation bonds (GOs)

Back 57

GO bonds are bonds that are General obligation of the issuing municipality (state, County, City, School District Etc).

Front 58

Tax and Revenue anticipation notes (TRAN)

Back 58

TRAN is a combination of Tax and Revenue notes.

Front 59

What are the four main functions of a municipal Bond attorney (Bond council)?

Back 59

1. To establish that the issue qualifies for the tax exempt status for interest

2. To determine whether the bonds are legally issued in accordance with the statutes

3. To prepare or examine the original draft and proceeding of the issue

4. To examine the bonds to see that they are properly executed

Front 60

With a grade of BB or lower, how would a bond be classified?

Back 60

Speculative grade

Front 61

What are the three primary reasons for refunding?

Back 61

1. To lower interest costs

2. To change the maturity or amateurization schedule of the bonds

3. To liberalize the bonds indenture provisions

Front 62

New Housing Authority bonds, public housing authority bonds

Back 62

Revenue bonds issued by a local housing authority. The interest and principal is paid for rents collected from the tenants. In addition, these bonds are backed by the public housing administration (PHA), a Department of Housing and Urban Development office (HUD), which guarantees the rental payments.

Front 63

Open-end additional Bond Covenant

Back 63

A covenant which permits the sale of additional bonds payable from revenues of the project.

Front 64

Consulting Covenant

Back 64

A covenant that requires that Services of a Consulting engineer of good reputation be retained.

Front 65

Debt Service or rate Covenant

Back 65

A covenant requiring the bond issuer to charge rates for use which are sufficient to meet Financial requirements on upkeep, debt service, safety, etc.