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

Show external business risk, Q. Show External business risk? External r...

Q. Show External business risk? External risk is the result of operating conditions imposed on the firm by circumstances beyond its control. The external environments in which

Personal budget project, 15 points) You need to develop a personal budget. ...

15 points) You need to develop a personal budget. Try to be as realistic as possible. If you are going to school and not working then do some research to find out what salary you w

Profit maximisation decision criterion, Profit Maximisation Decision Criter...

Profit Maximisation Decision Criterion According to this approach, actions which increase profits must be undertaken and those that decrease profits are to be avoided. In speci

Marketing, How to use integrated promotional mix to achieve marketing objec...

How to use integrated promotional mix to achieve marketing objectives

What does weighted average cost of capital, What does the "weight" refer to...

What does the "weight" refer to in the weighted average cost of capital? The weight pass on to in weighted average cost of capital refers to the portion of the total capital in

Quantitative or mixed-methods study, Application: Critiquing a Qualitative,...

Application: Critiquing a Qualitative, Quantitative, or Mixed-Methods Study Over the last several weeks you have explored many qualitative, quantitative, and mixed-methods rese

Determine current cost of equity, Your task is to determine CDW's current c...

Your task is to determine CDW's current cost of equity. Since the company is not yet publicly traded , you need to estimate its cost of equity from a set of comparable companies. U

Discounting technique for calculating time value of money, DISCOUNTING TECH...

DISCOUNTING TECHNIQUE is also called present value technique. It is the process of calculating the present value of cash flows.  Discounting is determining the present value of a

Estimate the total rate of return, Question: Explain: (a) the advant...

Question: Explain: (a) the advantages and disadvantages, to a company, of debt finance over equity finance; (b) the reasons why a company may choose to issue preference s

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