Business and Personal Finance Dictionary

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• REFUNDING ESCROW DEPOSITS (REDS)
  
  Financial instruments similar to pre-refunding bonds. Tax law changes in 1984 restricted tax exempt pre-refundings for certain types of municipal debt including airport and convention center related debt. To circumvent those restrictions, a forward transaction, rather than a second bond issue, is used to lock in a lower cost of funding. Under this arrangement, funds dedicated to repaying higher cost debt at the next call date are held in escrow. See pre-refunding bonds.
  
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