The definition of gross revenue pledge
Gross income to mortgage the bonds of the agreement of the municipality or another public sector organisation that requires the Issuer to first use of revenue for debt service delegation for the operation and maintenance (O&M) costs as second priority and likely funding them from other revenue sources. Of collateral, or lack thereof, is a factor in the ranking of the debt to the credit Agency and in the pricing of the issue.
Also known as a “pledged company”.
Breaking down the ‘gross revenue pledge
Like most restrictive provisions in the covenants of bond issue, gross of collateral, the company makes the debt issue safer for bondholders. Bondholders receive a guarantee that the income will be applied for principal and interest payments to the o & m costs. Pledged net income, transaction costs are taken into account before deduction of cost of servicing its debt. As a rule, the more security the gross of collateral the company is the reason for the issue of bonds to be offered at a lower interest rate, saving money on interest expense of the Issuer.
An example of a gross pledge income
In March 2018, University of Connecticut sold $ 152 million of special obligation student fee income on bonds for financing the student recreation center on the main campus of the University. The bonds are structured so to provide the debt service level over the next 29 years with semiannual interest. The contract for the bonds contains collateral source of income. The bonds are rated Aa3 AA – rating Agency Moody’s and S&P in the global rankings, respectively, one notch higher than the rating of state General obligation bonds Connecticut. Moody’s said the rating “reflects the scope of activities of the University, as well as its good results, the strength of pledged revenues and significant state capital funding, resulting in low direct debt obligations”.