bond-basics

SLGS

Pronounced “slugs,” it is an acronym for “State and Local Government Series.”  SLGS are special United States Treasury Securities sold to Issuers and Conduit Borrowers directly by subscription from the Department of the Treasury.  There are two types of SLGS: demand deposit (i.e., money market, short-term Securities) and time deposit (i.e., Fixed Rate Securities of varying maturities), the latter of which are more frequently used.  SLGS are designed to help Issuers and Conduit Borrowers comply with Arbitrage restrictions imposed by the Code on Tax-Exempt Bonds and are frequently used to restrict the Yield on investments or to fund an Escrow in connection with a Refunding or a Defeasance.


See Also

Refunding

A transaction in which refunding bonds are issued and their proceeds are used to pay off outstanding bonds.

Escrow Fund

Trust account established in the escrow deposit agreement that holds cash, investments, usually obligations of the federal government or, sometimes, federal agencies, or both, all of which are pledged to the payment of the debt service of the refunded bonds.

Defeasance

Termination of the rights and interests of the bondholders and release of liens on the security upon final payment of debt service or deposit of guaranteed payment in an irrevocable escrow fund.


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Verification Agent

A certified public accountant or a firm of certified public accounts engaged for preparing the verification report.