Legal Definitions - reissuable note

A reissuable note is a type of debt instrument that, once it has been repaid or matured, can be issued again by the same entity under the original authorization or facility. This mechanism allows the issuer to maintain a certain level of outstanding debt or funding capacity without needing to go through a new, often lengthy, authorization process each time old debt is retired.

Here are some examples to illustrate this concept:

• Municipal Infrastructure Funding: Imagine a city that needs ongoing funding for maintaining its roads, bridges, and public utilities. Instead of seeking voter approval for a new bond issue every few years, the city might establish a program to issue "reissuable infrastructure notes" up to a total limit of $100 million. As $10 million worth of these notes mature and are paid off by the city, the city can immediately issue another $10 million in new notes under the same program. This allows them to continuously fund necessary repairs and upgrades, keeping their total outstanding debt for infrastructure at or below the $100 million limit without needing a new legislative act or public vote for each subsequent issuance.

  This example demonstrates a reissuable note because the city is able to issue new debt instruments (notes) as old ones are retired, utilizing the same initial authorization to maintain a consistent funding source for its infrastructure projects.

• Corporate Revolving Credit: A large manufacturing company might have a $50 million revolving credit facility with a consortium of banks. This facility allows the company to issue short-term promissory notes or draw down funds up to that $50 million limit as needed for working capital, such as purchasing raw materials or covering payroll. If the company repays $5 million of these notes that were used to buy components, they can immediately issue another $5 million in notes under the same facility to finance a new production run or other operational expenses. The credit line "revolves," meaning the borrowing capacity is restored upon repayment.

  Here, the "notes" represent the company's borrowings under the revolving credit line. As these borrowings are repaid, the capacity to issue new notes (or draw down funds) is restored, illustrating the reissuable nature of the debt instrument within the established credit facility.

• Government Short-Term Borrowing: A national treasury often manages its short-term cash flow by issuing treasury bills. Let's say the treasury has a standing authority to issue short-term treasury bills to manage its daily and weekly financial needs. When a batch of 3-month treasury bills matures and is paid back to investors, the treasury can immediately issue a new batch of 3-month treasury bills of equivalent value to new or existing investors. This process allows the government to continuously roll over its short-term debt and manage its liquidity without needing fresh legislative approval for each new auction or issuance.

  This illustrates the concept of a reissuable note because the government is effectively "reissuing" its debt capacity by selling new treasury bills as old ones mature, maintaining its short-term funding strategy under a continuous authorization.