Prerefunding

Procedure, called a pre-re on Wall Street, in which a bond issuer floats a second bond in order to pay off the first bond at the first Call date. The proceeds from the sale of the second bond are safely invested, usually in Treasury securities, that will mature at the first call date of the first bond issue. Those first bonds are said to be prerefunded after this operation has taken place. Bond issuers prerefund bonds during periods of lower interest rates in order to lower their interest costs. See also Advance Refunding; Refunding; Refunding Escrow Deposits (REDS).