What Is a Bond Resolution?
A bond resolution is a document where the issuer approves a bond's issuance and sale, alongside characterizing the rights of the particular gatherings to the bond contract, to be specific the issuer and the bondholder.
Figuring out Bond Resolutions
Typically, a bond resolution is a document utilized with government bonds, especially general obligation bonds (GO), that frames the rights and obligations of the issuer and the bondholder and the points of interest of the obligation. The bonds address money advanced and qualifies the holder for interest payments and the return of principal. A bond resolution can likewise be called a bond indenture or a bond ordinance.
How a Bond Resolution Works
The term bond resolution is typically applicable to bonds issued by municipalities. A bond resolution depicts how much interest and principal will be paid to bondholders, when and how payments will be made, how bonds might be recovered, and what occurs in the event of default. It likewise portrays how bond funds might be utilized. Inability to meet the payment requirements might lead to serious outcomes and punishments including liquidation of the issuer's assets.
Assuming the issuer expects to increase taxes on its occupants to produce tax income to be utilized in the interest and principal payment of the overall obligation bonds, the bond resolution might specify that main a certain percentage of the tax might be funded into debt. At times, for example, with revenue bonds, a bond indenture is utilized rather than a bond resolution to characterize the legal terms of the bond issue and its financing.
A bond resolution shows the call features of a bond issue. For example, it frames how a sinking fund ought to be utilized in resigning all or a portion of outstanding bonds. The fund requires an issuer to routinely fund a escrow account, which will be utilized to pay off debt as it comes due. Moreover, the resolution likewise remembers rules for the issuance of extra bonds, payable from the revenue received from the project to be financed by the municipal bond.
A bond resolution likewise alludes to a ballot measure that permits electors to endorse or keep the issuance and sale from getting new bonds for a stated purpose. It comprises of the approving resolution and the award resolution. Issuance of the securities is normally approved in the approving resolution, and sale is typically authorized in a separate document known as the award resolution. This type of bond resolution depicts the nature and location of the project to be financed and the project's maximum likely cost.
Bond Resolution Example
For instance, a bond resolution could approve a municipality to issue $10 million in refunding bonds to refinance an outstanding water revenue bond and to finance the cost of improvements to facilities of the municipal region. In certain purviews, the overseeing body will act through a bond ordinance as opposed to by resolution.
- Bond resolutions are additionally called bond ordinances and most frequently relate to issuances authorized by municipalities or sovereign governments.
- Bond resolutions ordinarily incorporate an approving resolution, connected with the issuance, and an award resolution, connected with the sale.
- A bond resolution is a document that subtleties and approves the issuance of bonds or other fixed-income issues.
- The resolution states what interest and principal bondholders will receive, the dates and terms of the payments, the manner in which bonds can be reclaimed, and what steps are to be taken on the off chance that there is a default.