Taking advantage of declining interest rates over recent years, the Washington Suburban Sanitary Commission has approved the sale of $242 million in advance refunding bonds.
The offering will save the commision $36.7 million in interest on its total bonded debt of $1.1 billion, said an official of Alex Brown and Sons, managing partner of the sale.
At first, the cash raised by the new offering will be invested in government securities, and the interest earned will be used to off-set interest payments on previously issued bonds, which pay as much as 7.5 per cent. When the old bonds become callable, starting in 1964, they will be paid off with funds from the latest offering.
Interest rates on the new offering range from 3.25 to 5.65 per cent, averaging 5.5 per cent.
The new bonds carry AA ratings and will raise to AAA the rating on previous issues which are to be refunded, said the Alex Brown spokesman. Chase Manhattan Bank and Merrill Lynch, Pierce, Fenner & Smith were the other organizers of the syndicate of 280 investors which took the offering.
The 242 million bond issue is believed to be the largest municipal offering in Maryland history and the largest advance refunding bond issue ever. Advance refunding - selling new bonds to pay off old ones, but doing so before the old bonds come due - has become a common technique for in recent years since interest rates began coming down.