Total recall. [Refinancing of debt by utilities]
The dramatic rally in the US treasury markets in 1992 and 1993 offered utility treasurers a unique opportunity to radically restructure their outstanding debt profiles by redeeming and refunding callable and refundable bonds. Since January 1991, utility companies have issued over $100 billion of nonconvertible debt securities; 53 percent of these companies indicated [open quotes]refinancing fixed income securities[close quotes] as the primary use of proceeds. After approximately 18 months of heavy refunding activity, utility treasurers have nearly exhausted the supply of currently callable debt and are now looking at alternative methods of reducing their embedded cost of debt and increasing cash flows. The two most common methods are to repurchase highest-cost noncallable and/or currently nonrefundable bonds through [open quotes]open-market repurchases[close quotes] and [open quotes]tender offers.[close quotes] A third, less popular and less used, method is the [open quotes]defeasance[close quotes]. This article describes the advantages, disadvantages, and economic effects of these three types of financing.
- OSTI ID:
- 5162950
- Journal Information:
- Fortnightly; (United States), Vol. 132:4
- Country of Publication:
- United States
- Language:
- English
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