Nonprofit groups trying to refinance bonds to avoid extra costs have run into unexpected obstacles from insurance agencies, reports The Boston Globe.

Normally, bonds issued by universities, hospitals, and other large charities are safe bets for investors, and the groups were actually paying insurance companies to make the bonds more attractive to investors, including putting those bonds up for auction. But the recent meltdown in the real-estate market hurt many insurance agencies that held subprime-mortgage investments in their portfolios. As a result, investors have avoided their bonds, including those being auctioned for nonprofit groups.

When no one buys the bonds, the groups are under contractual obligations to pay interest rates of up to 20 percent, far higher than any payout they would have received. In addition, when the groups have tried to refinance to save costs, the insurance companies have refused to let them convert to bonds with more manageable interest rates.

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