Revenue Bonds

What this video covers

• Why revenue bonds do not require voter approval, and how the feasibility study replaces the public vote that general obligation (GO) bonds need
• What the trust indenture is, and why the rate covenant is the most critical protective covenant for maintaining debt service coverage
• How the non-competition or anti-diversion covenant prevents competing facilities from stealing project revenue
• What the additional bonds test (ABT) is, and the difference between senior parity bonds and subordinate lien (junior lien) bonds
• Why the net revenue pledge is the default assumption, and how the flow of funds staircase works from gross revenue through operations and maintenance (O&M), debt service, reserve funds, and surplus
• How the gross revenue pledge reverses priority so bondholders get paid before O&M
• How to calculate the debt service coverage ratio (DSCR), why 1.25x is the covenant floor for essential utilities but analysts demand 2.0x for discretionary projects, and the trap of confusing coverage with a simple percentage of revenue
• What the Electronic Municipal Market Access (EMMA) system provides, and how bond insurance substitutes the issuer's credit rating with the insurer's rating