From where is the underwriter's discount deducted?

The underwriter's discount is deducted from the proceeds of the bonds at closing. This discount represents the fee that underwriters charge for their services in facilitating the issuance and sale of bonds. It is essentially a cost of obtaining financing and is taken directly out of the funds raised from investors.

When bonds are issued, the issuer receives a certain amount of money—which is the net proceeds from the sale of the bonds. The underwriter's discount is subtracted from the gross amount raised to provide the issuer with the net proceeds. This means that while the total amount of bonds issued may be higher, the actual funds that the issuer receives after accounting for the discount are lower.

Understanding this process is crucial for managing debt effectively, as it directly impacts how much money is available for the issuer's intended uses following the bond sale. The focus on net proceeds is essential in financial planning and budgeting for the project or purposes for which the funds are raised.