Mandatory Sinking Fund Redemption - NABL (2024)

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If the financing includes Term Bonds, the Bonds may be subject to Mandatory Sinking Fund Redemption.A Mandatory Sinking Fund Redemption is a requirement (determined at Pricing) that the Issuer redeem, usually annually or semiannually, portions of the Principal amount of the related Term Bonds in accordance with a schedule, called a sinking fund installment schedule at a price equal to such Principal amount of the Bonds and the accrued and unpaid Interest on the Bonds. Mandatory Sinking Fund Redemptions usually carry no Premium and, in some cases, no notice provisions because the requirement is built into the Pricing for the Term Bond and known to the bondholders on the delivery date of the Bonds. The holders of the Principal amount of a Term Bond to be redeemed on the date of each Mandatory Sinking Fund Redemption are chosen at random, so the bondholders do not know when or whether all or any Principal amount of the Term Bond they hold will be redeemed.

The Debt Service schedules prepared by the Underwriter or the Financial Advisor may include both Term Bonds and Serial Bonds.Because a Term Bond is subject to Mandatory Sinking Fund Redemption, it will appear on these schedules like a series of maturities with an identical Interest Rate. If, as an example, a Debt Service schedule includes a Term Bond maturing on July 1, 2032, but subject to twelve, semiannual, Mandatory Sinking Fund Redemption dates, the schedule reflecting the repayment of the Principal for such Term Bond would be constructed so that the final Mandatory Sinking Fund Redemption date would be the date of the Maturity Date of that Term Bond (July 1, 2032), the first Mandatory Sinking Fund Redemption date would be scheduled for January 1, 2027, and the remaining Mandatory Sinking Fund Redemption dates would be each January 1 and July 1 in between January 1, 2027, and July 1, 2032.

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