Quote:
Originally Posted by Advogado
True, now may be a better time to issue replacement taxable bonds. However, the current bondholders would presumably claim that the lower current interest rates have increased the value of their existing bonds and thus the current bondholders' losses from the Center Districts' breach of the Districts' warranty that the current bonds are tax exempt. Furthermore, who knows what interest rates will be when, and if, it is necessary for the Center Deistricts to issue replacement bonds. In summary, it cannot be predicted how the issuance of replacement bonds, if that becomes necessary, would work out--but it wouldn't be pretty.
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Does the legal opinion attached to the tax free bonds disclose all risks? If so, the holders of the bonds could not claim anything. Besides, I imagine after this ruling that the price of the bonds will drop, possibly below par reflecting the uncertainty. In that case the CD would have to pay out less particularly if these bonds are no longer tax free, but taxable.