§1442. Defeasance of securities of a public entity

A. Securities of a public entity shall be defeased and shall be deemed to be paid and shall no longer be considered to be outstanding under the instrument providing for their issuance, and the covenants, agreements, and obligations contained in the instrument providing for their issuance shall be discharged if one of the following shall occur:

(1) There is deposited in an irrevocable trust with a bank which is a member of the Federal Deposit Insurance Corporation, or its successor, or with a trust company, monies in an amount sufficient to pay in full the principal of and interest and call premiums, if any, on such securities to their stated maturity or to the date fixed for their redemption, if such securities are callable for redemption prior to their stated maturities and irrevocable provision has been made for the call thereof.

(2) There is deposited in an irrevocable trust with a bank which is a member of the Federal Deposit Insurance Corporation, or its successor, or with a trust company, noncallable direct general obligations of the United States of America or obligations unconditionally guaranteed in principal and interest by the United States of America, including certificates or other evidence of an ownership interest in such noncallable direct obligations, which may consist of specified portions of interest thereon, such as those securities commonly known as CATS, TIGRS, and STRPS, the principal of and interest on which, when added to other monies, if any, deposited therein, shall be sufficient to pay when due the principal of and interest and call premiums, if any, on such securities to their stated maturity or to the date fixed for redemption, if such securities are callable for redemption prior to their stated maturities and irrevocable provision has been made for the call thereof.

B. Neither the obligations, the moneys deposited with the bank pursuant to this Section, nor the principal or interest payments on any such obligations shall be withdrawn or used for any purpose other than and they shall be held in trust for the payment of the principal of and premium, if any, and interest on the securities defeased. The holders of the securities which are so defeased shall have an express lien on such moneys or governmental obligations until paid out, used, and applied in accordance with this Section.

Added by Acts 1978, No. 381, §1, eff. July 12, 1978; Acts 1988, No. 764, §1, eff. July 15, 1988; Acts 1999, No. 297, §1.