What is "refunding"

vb. (present participle of refund English)

Refunding occurs when an entity that has issued callable bonds calls those debt securities from the debt holders with the express purpose of reissuing new debt at a lower coupon rate. In essence, the issue of new, lower-interest debt allows the company to prematurely refund the older, higher-interest debt.

On the contrary, NonRefundable Bonds may be callable but they cannot be re-issued with a lower coupon rate. i.e. They cannot be refunded.