Call provisions, Financial Management

Assignment Help:

The issuer's right to call back the issue before the maturity date is referred to as a "call provision". In case of asset-backed securities, the trustee is granted the optional clean-up call provision. There are variants of such provisions.

Percentage of collateral call: In this case, bonds that are outstanding can be called at par value if the value of the outstanding collateral goes below a prespecified percentage of the original collateral's value.

Percentage of bonds clean-up call provision: In this type, bonds are called at par value when the percentage of the amount of outstanding bonds relative to the original amount of bonds issued exceeds a particular level.

Latter of percent or date call: The bonds outstanding are called in either of the two situations: (i) the value of the outstanding collateral reaches a predetermined level before the specified call date or (ii) the call date is reached but the value of the outstanding collateral still remains above the predetermined level.

Auction call: Here, call option will be exercised if, on a particular date, the value of the outstanding collateral is sold in the auction at a price greater than its par value. The excess amount received on the auctioned collateral is retained by the trustee and then subsequently paid to the issuer through the residual.

Insurer call: This call provision permits the issuer to call the bonds when the cumulative loss on the collateral reaches a particular level.


Related Discussions:- Call provisions

Explain why accounting profits and cash flows are different, Explain why ac...

Explain why accounting profits and cash flows are not the same thing. Ans: Stock value relies on future cash flows, their timing, and their riskiness.  Profit calculations do n

Measurement of interest rate risk, Changes in the bond value is inversely ...

Changes in the bond value is inversely related to the change in the interest rates. If an investor holds a long bond position, he would incur loss if the in

Call provisions, The issuer's right to call back the issue before the...

The issuer's right to call back the issue before the maturity date is referred to as a "call provision". In case of asset-backed securities, the trustee is grante

Aggressive approach of financial management, Q. Aggressive Approach of fina...

Q. Aggressive Approach of financial management? A -firm may be aggressive in financing its assets. An aggressive policy is said to be followed by the firm when it uses short-te

Preferred stock, Preferred Stock This is a category of capital stock th...

Preferred Stock This is a category of capital stock that will gives its holders preference  over common stockholders in the distribution  of earnings  or rights to the assets o

Explain trade credit is free credit, Trade credit is free credit.  Do you a...

Trade credit is free credit.  Do you agree or disagree with this statement?  Explain. No the Trade credit is not free.  It comprises a cost.  Who bears that cost relies on the te

Determine stock turnover, a)   Year 2 Year...

a)   Year 2 Year 1   Stock turnover (350/500) * 365 = 255.5 days (250/450) * 365 = 202.7 days

Define the services that international banks provide, Briefly discuss some ...

Briefly discuss some of the services that international banks provide their customers and the market place. Answer:  International banks can be categorized by the types of servic

Put option, Put Option This is a right which is granted in exchange for...

Put Option This is a right which is granted in exchange for an agreed-upon sum to sell property. Options are mostly used frequently in securities transactions it also used stoc

Working capital, W orking Capital Working capital is measured as th...

W orking Capital Working capital is measured as the difference among organization present assets and its current liabilities. Therefore, it is interpreted by some as a meas

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd