As the state prepares to issue $512 million in new bonds next month, it is also making preparations to reduce the state’s debt nearly $7 million by refunding as much as $550 million in existing bonds.
Patti Konrad, director of debt management in Treasurer Nancy Kopp’s office, said it’s somewhat similar to refinancing a mortgage by reducing the interest rate on existing bonds. Last week, the Board of Public Works authorized up to $550 million in refunding bonds. Right now Konrad estimated that the state could refund about $200 million in bonds, which could yield up to $6.9 million in savings.
“When you refund a bond, you are not incurring more debt,” Konrad said. “What you are doing is getting rid of a higher rate, and replacing it with a lower one. It reduces the interest cost on the bonds.”
The term of bonds are not impacted when the bonds are refunded, Konrad said. If a bond has five years of payments left, then the refunded bond will have a lower interest rate, but still must be paid back within five years.
1 comment:
She is misleading, when a Municipal bond is refunded or called the debt is refinanced but not necessarily for the remaining term of the original issue. I would expect nothing less from the Omally Administration.
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