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 about the primary and secondary markets, Explain about the primary ...

Explain about the primary and secondary markets. Primary and secondary markets: A primary market is a financial market wherein new matters of financial securities (both s

Advantages and disadvantages of foreign direct investment, What are the dis...

What are the disadvantages and advantages of Foreign direct investment (FDI) like opposed to a licensing agreement with a foreign partner? Answer:  The major advantage of FDI (

What was the second ground of criticism, What was the Second ground of crit...

What was the Second ground of criticism of traditional treatment Second ground of criticism of the traditional treatment was that focus was on financing problems of corporate e

What is marginal cost of capital, What is Marginal cost of capital Marg...

What is Marginal cost of capital Marginal cost of capital, by contrast refers to incrementalcost associated with new funds raised by firm. Marginal cost is the specific conc

Basic methods of risk management, Q. Basic Methods of Risk Management? ...

Q. Basic Methods of Risk Management? Risk is inherent in business and hence there is no escape from the risk for a businessman. However, he may face this problem with greater c

Investment decision and cost of capital, INVESTMENT DECISION AND COST OF CA...

INVESTMENT DECISION AND COST OF CAPITAL In Finance, investment decision is disclose the allocation of funds in fixed assets or long term. This decision is also known as capita

Inverse floaters, Normally, floater coupon rate moves in the same dir...

Normally, floater coupon rate moves in the same direction as the reference rate. That is, with an increase in the reference rate, the floater coupon rate also increases

Clemson software, Clemson Software is considering a latest project whose da...

Clemson Software is considering a latest project whose data are given below.  The needed equipment has a 3-year tax life, after which it will be worthless,and it will be depreciate

Return on equity, Your quantitative analysis will describe the financial st...

Your quantitative analysis will describe the financial strength of you company using the metrics we discussed in class. You may use other measures at your discretion, but the follo

Rights of investors, Rights of Investors CERTIFICATES An investor ...

Rights of Investors CERTIFICATES An investor is entitled to receive shares/unit certificates allotted to him within a period of 6 weeks from the date of closure of the sub

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