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

What are financial markets? why do they exist?, What are financial markets?...

What are financial markets? Why do they exist? Monetary markets are where financial securities are sold and bought.  They exist mainly to bring surplus economic units (those ha

Working capital based on operating cycle, Q. Working Capital Based on Opera...

Q. Working Capital Based on Operating Cycle? The concept of operating cycle, helps determining The time scale over which the current assets are maintained. The operating cycle

List the benefits of the flexible exchange rate regime, List the benefits o...

List the benefits of the flexible exchange rate regime. Answer:  The benefits of the flexible exchange rate system include: a) Automatic attainment of balance of payments eq

Divisional performance evaluation, In modern strategic management accountin...

In modern strategic management accounting it is important to use appropriate performance measurements and control concepts, underpinned by theories and models applied in a variety

Regular versus special redemption prices, The call prices for vario...

The call prices for various issues mentioned above are known as regular redemption prices. Point to be noted is that the regular redemption prices are above

Define the primary reasons that companies hold cash, What are the primary r...

What are the primary reasons that companies hold cash? Companies hold cash to make essential payments, to take benefit of opportunities as they arise, and to cover unforeseen eme

Define the meaning of overtrading, Define the meaning of Overtrading Wh...

Define the meaning of Overtrading When  a  company  is  trading  at  a  very  fast  pace,  it  would be  generating  sales  on  credit  with  speed, so have a large volume of t

internal rate of return decision rule, Towson Enterprises has recognized t...

Towson Enterprises has recognized two mutually exclusive (can’t do both) projects.  The relevant cash flows and timing of those cash flows are shown in the following table.  Suppos

What is corporate social responsibility, (a) The term "financial reporting"...

(a) The term "financial reporting" incorporates not only financial statements, but also includes other means of communicating financial and non-financial information. Financial rep

Explain the term phishing, QUESTION (a) (i) Describe briefly two potent...

QUESTION (a) (i) Describe briefly two potential E-Banking risks that may have an adverse impact on banks. (ii) Outline some measures to control these two risks. (b) Outli

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