Conduit Bonds – What They Are and How They WorkOctober 15th, 2012 by David Waring
Conduit bonds are bonds issued by a municipality on behalf of a private entity. Conduit bonds are normally issued to fund projects by non profit (501(c)(3)) entities. Examples of the type of project funded by conduit bonds is public housing.
Although the bond is issued by the municipality normally the interest and principal payments are tied to the project only. If the revenues generated by the project are not sufficient to cover bond payments then the government is normally not required to step in and make payments.
For more definitions and explanations please visit the Learn Bonds glossary where we give the meaning of many additional bond terms.