2.3.1.2 Extraordinary Redemption
If bondholders believe a mandatory redemption (generally forcing the issuer to refinance to avoid the redemption turning into a payment default) is preferable to leaving debt outstanding, they may require an extraordinary redemption. Although rare, extraordinary redemption circumstances include the following:
- Loss by an eminent domain action taking property subject to a lease or critical to generating revenue or an issuer decision to not repair or replace that type of property following damage or destruction
- A dissolution of the issuer, a merger of the issuer with another governmental entity, or a significant change in the issuer’s operations or service area beyond the issuer’s control (generally, issuers will covenant to not take or allow such actions if under its control)
- A change in the tax status of the bonds (e.g., interest on the bonds becomes taxable)