What type of bond issuance involves establishing an irrevocable escrow account?

The type of bond issuance that involves establishing an irrevocable escrow account is advance refunding. In this process, a governmental body issues new bonds to refinance existing bonds and sets aside the proceeds in an escrow account, typically invested in government securities. The income generated from these securities is then used to pay the principal and interest on the old bonds until their maturity, effectively allowing the issuer to take advantage of lower interest rates or to restructure their debt.

This method is particularly useful when an issuer seeks to lower its debt service costs while managing its outstanding liabilities. Establishing an irrevocable escrow account ensures that funds will be reliably available for making the necessary payments, thus providing a level of security to bondholders.