When bonds are issued, the proceeds are the amount of money the issuer receives from the buyers, or underwriters. Depending on how the bonds’ coupon rates compare to current market interest rates, the proceeds may be more or less than the bonds’ par value. In other words, the issuer may receive more or less money when the bonds are originally sold than it will eventually repay in principal.
For example, if $100 million of 20-year term bonds are priced with a 4 percent coupon rate while current market rates are 3 percent, the issuer may receive $115 million in proceeds, or more than the $100 million of par value.
Bond proceeds may be used only for the purposes as provided in the bond contract or authorizing documents.