The bond counsel, an attorney or law firm retained by the borrower, must look over a potential bond issue to make sure all laws and regulations are followed.
The bond opinion letter is a document prepared by counsel to express an opinion about the bond’s issue from a legal standpoint.
The bond opinion usually confirms the following:
- The bonds are valid and binding and have been duly authorized and executed
- The bond’s source of payment or security
- Whether and to what extent bond interest is exempt from federal and or state income taxes
If the bond counsel has no reservations as to the legality and tax status of the bonds, it will issue an unqualified legal opinion. If there are potential issues, it will issue a qualified legal opinion, making the investors aware of a potential issue.
What’s important here?
Investors are dependent on the bond counsel’s opinion letter as to the legality and tax repercussions of a bond they purchased.
