Open-end/ Closed-end Indenture

In an Open-end indenture, new issuance of bonds are permitted only when a test has determined existence of sufficient revenues for debt service coverage on new and existing municipal bonds. On the other hand, in a closed-end indenture, issuing more bonds with an equal priority lien on earnings is prohibited unless a closed-end provision exists. With a closed-end provision, issuance of additional bonds is subordinated to the original issue.

Sinking Fund

An indenture can have a sinking fund provision to call a portion of an outstanding debt. A sinking fund requires an issuer to place funds into a separate escrow account, and then use these funds to pay off debt as it comes due. A bond resolution indicates the call features of a bond issue. In addition, the books and records covenant requires outside audit of financial records and reports.

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