Bond Refunding 24 BAY AREA TELEPHONE COMPANY rohn Whiteck, financial vice president of Bay Area Telephone Company, has just begun reviewing e minutes of the company's November 1992 board of directors meeting. The major topic discussed the meeting was whether Bay Area should refund any of its currently outstanding bond issues particular interest is a $50 million, 30-year, 11.5 percent, first-mortgage bond (consisting of 00 $1,000 par value bonds) issued approximately five years ago. Four of the board members had markedly different positions on the question. At the conclusion of the meeting, Ronald Tire aan of the board, asked Whiteck to prepare a report analyzing the alternative points of view he bonds in question had been issued in January, 1988, when interest rates were still re gh. It was necessary to issue the bonds at that time, despite the high interest rates, beca any needed to complete the modernization and expansion of its switching facilities Francisco to meet rapidly growing demand for telephone services in its service area. A eck and the board strongly believed interest rates would decline in the future, bu of when rates would fall or by how much. Now, almost five years later, with lowe nsell A-rated bonds at a coupon rate significantly less than 11.5 percent. Thiteck had anticipated a decline in interest rates when he sold the $50 million at the bonds be made callable after five years. (If the bonds had not beer d have had to nay an interest rate of onl nercent a full 50 basis Bond Refunding 24 BAY AREA TELEPHONE COMPANY rohn Whiteck, financial vice president of Bay Area Telephone Company, has just begun reviewing e minutes of the company's November 1992 board of directors meeting. The major topic discussed the meeting was whether Bay Area should refund any of its currently outstanding bond issues particular interest is a $50 million, 30-year, 11.5 percent, first-mortgage bond (consisting of 00 $1,000 par value bonds) issued approximately five years ago. Four of the board members had markedly different positions on the question. At the conclusion of the meeting, Ronald Tire aan of the board, asked Whiteck to prepare a report analyzing the alternative points of view he bonds in question had been issued in January, 1988, when interest rates were still re gh. It was necessary to issue the bonds at that time, despite the high interest rates, beca any needed to complete the modernization and expansion of its switching facilities Francisco to meet rapidly growing demand for telephone services in its service area. A eck and the board strongly believed interest rates would decline in the future, bu of when rates would fall or by how much. Now, almost five years later, with lowe nsell A-rated bonds at a coupon rate significantly less than 11.5 percent. Thiteck had anticipated a decline in interest rates when he sold the $50 million at the bonds be made callable after five years. (If the bonds had not beer d have had to nay an interest rate of onl nercent a full 50 basis