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A call provision allows the issuer to retire a bond before maturity.
Most bonds have a "call" provision, allowing the issuer to redeem the issue, usually at a price above face value.
Stephen Carter, senior market analyst at MCM CorporateWatch, a research firm, said the deal included a make-whole call provision.
Bonds give the debtor certainty over its ability to use the capital for a fixed period of time (unless there is a call provision written into them).
The call provision allows hybrid bonds to pay a rate that is closer to five-year than 60-year yields, while still masquerading as a close relative of equity.Complex financial instruments designed to earn a particular label from ratings agencies have an inglorious history: the mind turns to the subprime mortgage-related bonds that caused so much trouble in 2007 and 2008.
The catch is in that call provision.
Similar(47)
Generally, you don't have to worry about optionality or call provisions and so it's math.
The notes mature on Oct. 14, 1992, and carry put and call provisions that can be exercised in 1988.
While call provisions have historically been the default option in convertible security design, only a minority of post-2005 issues are callable.
The government now call provisions like these "perverse incentives" and argue that they should be removed from our social security provision.
Beware of call provisions.
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