Question

In your words, describe the bond-refunding process. This is a formal essay.

Answer 1

Bond refunding process:

The new debt issues are used in the process of refunding which is termed as refunding bonds.

Refunding refers to the process of redeeming or retiring an outstanding bond (issued at a maturity) by way of using the earnings (proceeds) from a new debt issue.

The new issue bonds are constantly issued at lesser value of interest rate than the refunded issue guaranteeing the significant deduction in interest expenses for the guarantor (issuer).