Utility Revenue Bond

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Definition of 'Utility Revenue Bond'

A utility revenue bond is a type of municipal bond that is issued by a public utility company. The proceeds from the bond sale are used to finance the construction or expansion of the utility's infrastructure. Utility revenue bonds are typically backed by the utility's revenues, which makes them a relatively safe investment. However, they do carry some risk, as the utility's revenues could be affected by economic conditions or other factors.

Utility revenue bonds are often issued at a lower interest rate than other types of municipal bonds, such as general obligation bonds. This is because the utility's revenues are considered to be a more secure source of repayment than the general taxing power of the municipality.

Utility revenue bonds are typically rated by credit rating agencies. The rating assigned to a utility revenue bond reflects the creditworthiness of the utility company and the likelihood that it will be able to repay the bondholders.

Utility revenue bonds can be purchased by individual investors, as well as institutional investors such as pension funds and insurance companies. They are typically sold in denominations of $5,000 or more.

Utility revenue bonds can be a good investment for investors who are looking for a safe, fixed-income investment. However, it is important to carefully evaluate the creditworthiness of the utility company before investing in its bonds.

Here are some additional details about utility revenue bonds:

* They are typically issued with a term of 20 to 30 years.
* The interest rate on utility revenue bonds is typically fixed for the life of the bond.
* Utility revenue bonds are exempt from federal income tax, but they may be subject to state and local taxes.
* Utility revenue bonds are often used to finance the construction of new power plants, transmission lines, and other infrastructure.

If you are considering investing in utility revenue bonds, it is important to consult with a financial advisor to make sure that they are a good fit for your investment portfolio.

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