united-states corporate-law
What is a Transition Bond Company?
<p>I've come across the term <code>Transition Bond Company</code>, and I'm trying to figure out what it is &ndash; in relatively plain English, since I lack any legal background whatsoever.</p>

<p>The context in which I've seen the term used is in connection to regulated utility companies in the US (e.g., electric companies).</p>

<p>Any explanation?</p>

<p>"Transition bonds" are debt for which the collateral is "transition property."</p>

<p>Periodically U.S. states authorize utilities to levy a charge on individual consumer bills.  The reasons they may do so are varied (<em>e.g.</em> to compensate a former monopolist during the transition to a competitive utilities market).</p>

<p>The right to levy this charge now and in the future is a type of (transition) property.  Since this right has value in the form of a future stream of revenue, it can serve as collateral when debt it taken on (here in the form of bonds).</p>

<p>The utility with the property rights can form a subsidiary called a "transition bond company" that handles the bond issuance.</p>

<p>Here are a few examples of state laws to the above effect.</p>

<p><a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXXII/Chapter164/Section1H/Print" rel="nofollow">Massachusetts</a></p>

<p><a href="http://www.cga.ct.gov/2010/rpt/2010-R-0201.htm" rel="nofollow">Connecticut</a></p>
