Breach of a covenant, promise or duty imposed by the Bond, Bond Resolution/Ordinance, an Indenture or other financing document (such as a Letter of Credit Reimbursement Agreement). The most basic type of Default is a payment default (i.e., when the Issuer (or Borrower) fails to pay Principal, Interest, or Redemption price on a Bond Issue when due). Other types of Defaults are often referred to as “technical” defaults, since, rather than involving failures to make payments, they are triggered when contractually defined “Events of Default” occur, such as failure by the Issuer or Borrower to comply with a covenant (e.g., a failure to charge rates sufficient to meet rate covenants or a failure to maintain prescribed Insurance). A Default becomes an Event of Default, which triggers whatever remedies may be provided in the Bond documents, when the Default remains in existence after the allowable cure period provided in the Bond documents.
Rule outlined in Section 147(b) of the code that states private activity bonds are not tax-exempt bonds if the weighted average maturity of the bond issue exceeds 120% of the average reasonably expected economic useful life of the facilities financed with the bond proceeds.
