Catastrophe Call

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Catastrophe call

Early redemption of a municipal revenue bond because a catastrophe has destroyed the project that provided the revenue source backing the bond.

Catastrophe Call

The call of a bond that occurs when an asset secured by that bond is destroyed. For example, suppose a company issues a bond to build a factory, with the coupon and principal payments secured by the revenue that factory produces. If that factory burns down, there is nothing securing the future coupon payments, and the issuer may make a catastrophe call to save itself from a liability it may not be able to pay.

catastrophe call

Redemption of a bond because of a disaster. For example, a bond issue collateralized by an airplane may be called if the plane crashes.

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