The incremental par amount established for a bond issue at which the bonds may be purchased.
How to Prepare Bonds
The method by which Bonds are executed is governed by the authorizing statute or by Issuer decision. If manual signatures are necessary, each Bond will have to be physically signed by the person or persons given the authority to sign. If Facsimile Signatures are permitted, a photocopy of the signature can be copied or printed onto each Bond. Some states require that anyone who signs Bonds have their signature on file with the state. The seal of the Issuer can also be manually affixed or be a facsimile. Ask your supervising attorney for guidance concerning the regulations governing Facsimile Signatures and affixing Issuer seals of the state in which the Bonds are being issued. In addition, the Bond Resolution of the Issuer should specifically authorize the use of Facsimile Signatures and reproduction of the seal of the Issuer on the Bonds when an original seal or original signatures are not expected to be used. Once the Bonds are each manually authenticated (or signed) by the Paying Agent or Trustee, as the case may be, they become “live” Bonds.
The form of the Bond may be set out in or attached as an exhibit to the Indenture or Bond Resolution. The initial draft of the Bond may contain only a Dated Date since the Pricing of the Bonds has not occurred and the final Principal amounts and Interest Rates have not yet been determined. Special attention should be devoted to the Bond form because it must exactly reflect the terms or parameters, in the Indenture or Bond Resolution, including all applicable Redemption provisions. Any material terms of the Bond Issue should be inserted not only in the Indenture or Bond Resolution, but in the Bond form as well. The Bond form becomes the template for the printed or typewritten Bonds, so it is imperative that it be kept current. Once the Bonds have been sold, the Financial Advisor or the Underwriter will make available a set of “final numbers” that show the Dated Date of the Bonds, Maturity Dates, Principal amounts, Interest Rates, Redemption provisions and certain other material information. Check the sections of the Indenture or Bond Resolution dealing with the Bond terms, the Bond form, the Bond Counsel Opinion and the Offering Document to confirm that the terms of the Bond sale shown in the final numbers and other key terms are consistent with the Bond Purchase Agreement, in the case of a Negotiated Sale or the winning bid on the Bonds, in the case of a Competitive Sale.
A Registered Bond is a Bond that is registered on books held by the Paying Agent or the Trustee. Both the Principal and Interest are registered in the owner’s name. Any transfer of ownership must be noted on this register. The term “registered” refers to the fact that records are maintained with respect to payment of both Principal and Interest to that registered owner. As a result of federal tax law changes in the early 1980s, Tax-Exempt Bonds must be issued in registered form. This requirement is found in Section 149(a) of the Code.
The Issuer of the Bonds is obligated to repay the Principal to the bondholders according to the terms of the Bonds. In the case of Conduit Bonds, the Borrower rather than the Issuer has the repayment obligation, and the Bond form should specifically state that the Bonds are not a debt or liability of the Issuer and that such Bonds will be repaid only with funds received by the Issuer from the Borrower. The appropriate language describing the Issuer’s obligation to repay the Bonds can, in most cases, be found in the authorizing statute and will track through the Indenture or Bond Resolution, the Bond form, the Bond Counsel Opinion and on the cover and in the body of the Offering Document.
If the Bonds are going to be Book-Entry Only through DTC, the Bond should contain “Book-Entry Only” language. DTC provides model language that can be used. Book-Entry Only bonds are Registered Bonds; however, for Book-Entry Only Bonds, DTC is the only registered holder and disseminates payments received from the Paying Agent to the beneficial owners.
All Bonds are identified by a designated official name. There are thousands of state and local governments that can issue Bonds, and many have several different Bond Issues outstanding. It is for this reason that the name of the Bond Issue appears on the Bond. The name of the Bond Issue may identify the Principal amount of Bonds, the Issuer, the Bond type, the federal income tax status of the Bonds, any Conduit Borrower and year of the Bond Issue (or series). The title for the Bond Issue is typically found in the Bond Resolution adopted by the Issuer.
The process of designating bonds with a letter and a number per procedures outlined in a bond’s indenture or bond resolution.
A unique identification number assigned to a bond by the Committee on Uniform Securities Identification Procedures (“CUSIP”).
The date of a bond issue from which interest begins to accrue, typically the date of the closing.
The date upon which the principal of a bond becomes due and payable to the bond owner.
The dates when interest on a bond is payable, usually semiannually and usually on the first or fifteenth day of the month.
The rate expressed as a percentage of the principal amount of a bond used to determine the amount of interest to be paid by the issuer or the borrower.