Bob's Daily Buzzword: `Revenue Bonds'

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Aug. 12 (Bloomberg) -- Bob Rice, general managing partner with Tangent Capital Partners LLC, explains "Revenue Bonds." (Source: Bloomberg)

Revenue bonds.

Women talking a lot about this, especially with detroit and bankruptcy issues.

We look at municipal bonds and say there are two agrees.

There are bonds in which the use the full taxing power to pay you out and we have revenue bonds that are tied to a specific money-making project.

You learn user fees or some kind of taxes that they are charging.

Take a one advantage is if you have a contract, there is not a lot of competition.

One of the big issues came from the new jersey turnpike.

You get the seas off of the new jersey turnpike.

Obviously there will not be a lot of turnpike spoke in new jersey in the near future.

Airports and water sewage facilities pierre did you are investing in essentially a protective sort of business but not getting taxes.

, as far as credit worthiness, how did you mention -- measure these?

This is really interesting.

Traditionally people with a general obligation bonds are much better and have had a lower interest rates.

Lo and behold, when you get into a bankruptcy, the rules are different.

With revenue bonds, unlike general obligation bonds, they continue to pay and a lean that you have on the assets that are securing the bond stays in place.

So as a creditor, once you get in the bankruptcy, you could be better off with the revenue bonds.

Because the general obligation, if they file for bankruptcy, you stop getting paid?

You cannot sue them.

They stop paying.

The judge has to approve any particular thing that would go out.

That is not the case with the revenue bonds.

That is very interesting.

So they could potentially come eventually do better than general obligation bonds.

To go exactly.

If you are worried about unfunded pension plans and health plans, revenue bonds might be the way to go.

Take a think you very much, as always.

This text has been automatically generated. It may not be 100% accurate.

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