Glossary of Municipal Securities Terms


A failure to pay principal of or interest on a bond when due or a failure to comply with other covenant, promise or duty imposed by the bond contract. The most serious event of default, sometimes referred to as a “monetary” default, occurs when the issuer fails to pay principal, interest or other funds when due. Other defaults, sometimes referred to as technical or non-payment defaults, result when specifically defined events occur, such as failure to comply with bond contract covenants, failing to charge rates sufficient to meet rate covenants, failing to maintain insurance on the project or failing to fund various reserves. Generally, if a monetary default occurs or if a technical default is not cured within a specified period (usually after notice) such default becomes an event of default and the bondholders or trustee may exercise legally available rights and remedies for enforcement of the bond contract. See: ACCELERATION.

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