Bond - An interest-bearing promise to pay a specified sum of money--the principal amount-due on a specific date.

Bond Insurance - An optional policy purchased by the issuer to insure timely payment of principal and interest to bondholders.

Bond Rating - Designation assigned by credit rating agencies to give indication of credit quality.

Bond Resolution - Resolution authorizing the issuance of securities, approving the Notice of Sale and the Official Statement. The resolution also contains the covenants and restrictions of the issue.

Bondholder - Any person who is the bearer of any outstanding bond registered to the bearer or not registered. Also means the registered owner of a registered bond.

Callable Bonds - Bonds that are redeemable by the issuer prior to the maturity date at a specified price at or above par. May be accomplished by refunding.

Closing Date - The date on which all documents are finalized and signed. After an issue is declared to be closed, bond counsel authorizes the exchange of money and securities,

Competitive Bid - A sale of municipal securities by an issuer in which the underwriters or syndicates of underwriters submit sealed bids to purchase the securities. This is contrasted with a negotiated underwriting.

Conversion to Fixed Rate - Conversion of a variable or floating interest rate to a Fixed rate. May occur automatically under predetermined conditions or may occur at the option of the issuer. Optional conversion could, under certain circumstances, be called a "reissuance" by the Treasury Department.

Costs of Issuance - Expenses paid by the issuer related to the authorization sale and issuance of bonds or notes, such as consultants' fees, legal fees and charges, trustee's fees. printing costs, bond or note discounts, costs of credit ratings, fees and charges for execution and safekeeping of bonds or notes, and filling and recording fees.

Credit Enhancement - A credit support purchased by the issuer to raise the credit rating on a debt issue.  The most common credit enhancements consist of municipal bond insurance policies, direct or standby letters of credit, Lines of credit and guaranteed investment contracts (GICs).

Debt Service Fund - Moneys pledged and set aside to repay debt. May be held by the issuer or the trustee.

Default - Failure to pay principal or interest promptly when due.

Defease - To set aside sufficient money to retire outstanding debt when due. A full defeasance results in release from covenants and contractual obligations contained in the bond documents.

Financial Advisor - A consultant to an issuer who provides advice with respect to the structure, timing, terms, or other similar matters concerning a new issue.

Floater - A variable rate bond.

Indenture - Bond resolution which contains all terms and provisions of the financing plan.

Investment Banker - An individual or firm that underwrites new issues of municipal securities.

Issuer - A state, political subdivision, agency, or authority that borrows money through the sale of bonds, notes, or certificates of participation.

Letter of Credit - Bank credit facility wherein the bank agrees to lend a specified amount of funds for a limited term. For example, a bank providing an irrevocable direct pay letter of credit both lends its own credit rating to the issue and agrees to pay investors on each interest payment, date. The bank will be reimbursed by the issuer.

Management Fee - The portion of the spread received by the investment banking firm allocated to structuring financing alternatives, evaluating all aspects of the financing plan, securing ratings or credit enhancements, preparing the official statement, and coordinating the financing team to prepare a new issue of securities for sale to investors.

Mandatory Redemption - Circumstances that require the call or redemption of outstanding securities, usually at par.

Maturity - The date when the principal amount of a security becomes due and payable.

Negotiated Underwriting - In a negotiated underwriting or sale, the issuer of municipal securities chooses one underwriter or a group of underwriters to sell its bonds to investors. There is no competitive bid for the issue.

Official Statement (Prospectus) - The official report prepared by or for the issuer indicating the economic, financial, and social characteristics of the issuer and the collateralization for the bond issue.

Par Value -  The principal amount of a bond or note due at maturity.

Paying Agent - Place where principal and interest are payable, Usually a designated bank or the office of the treasurer of the issuer.

Permitted Investments - Legal investments of the bond proceeds as allowed under the laws of the state and by the resolution of issuance.

Preliminary Official Statement - A preliminary version of the official statement which is used by the issuer and underwriter to describe the proposed issue prior to the determination of interest rate(s) and offering price(s).  Contains a description of the project, the security, the call provisions, and the financial and economic condition of the issuer.

Rating Agency - An agency which analyzes new and outstanding bond issues to assign a rating of comparative quality.

Rebate - As defined in the Tax Reform Act 1986, state and local governments must "rebate" or remit to the U.S. Treasury Department interest earned on any portion of gross bond proceeds (bond proceeds plus funds segregated and pledged to pay debt service) that was invested at a higher yield than the original reoffering yield on the bonds to the public, with certain exceptions.

Recycling - The use of principal receipts received from borrowers to acquire or originate new loans.

Refunding - A system by which a bond issue is redeemed by a new bond issue under conditions generally more favorable to the issuer.

Remarketing Agreement - The agreement between the issuer and the remarketing agent (usually an investment banking firm) describing the procedure and compensation for resetting interest rates and arranging for the remarketing of securities to investors when put back (returned) by other investors.

Reserve Fund - Fund held by issuer or designated trustee for a portion of proceeds as required by law and the bond resolution. May not exceed 10% of the net proceeds of the bonds. Often is required on revenue bonds to maintain reasonably required reserve in the event of a shortfall in revenues to pay debt service.

Revenue Bond - A bond payable solely from net or gross non ad valorem tax revenues derived from general fund revenues, tax increment revenues, or tolls, charges or rents paid by users of the facility constructed with the proceeds of the bond issue.

Serial Bonds - Bonds that mature in each year over a period of years, usually at varying interest rates,

Sinking Fund - A fund established by bond issuers, generally required in the bond resolution, that is increased through time for the purpose of either retiring some of the outstanding bonds before their maturity or reducing the risk of default of the bonds,

Stand-Alone - The rating of bonds on their own merits without the use of credit enhancement.

TEFRA Hearing - A public hearing that must be held by the sponsoring government agency prior to issuing private activity bonds, Initially required by the Tax Equity and Fiscal Responsibility Act of 1982 of all industrial development bonds.

Trustee - A bank designated by the issuer as the custodian of funds and official representative of bondholders. Trustees are appointed to insure compliance with the contract and represent bondholders to enforce their contract with the issuers.

Underwriter - A financial institution (investment bank or commercial bank) which purchases a new issue of municipal securities for resale. The underwriter may acquire the bonds either by negotiation with the issuer of by award on the basis of a competitive bidding.

Underwriter's Counsel - A firm of municipal bond attorneys hired by the underwriter to prepare the official statement in a negotiated underwriting and review all documents.

Underwriting Fee -The portion of the spread allocated to the underwriting department in an investment banking firm.  The fee covers both time and effort expended to advertise the issue, form Syndicates or selling groups and also covers underwriting risk.