Provisional call feature

Provisional call feature

A stipulation in a convertible issue that allows the issuer to call the issue during the noncall period if the price of the stock reaches a certain level. In the case of convertible securities, right of an issuer to accelerate the first redemption date if the underlying common should trade at or above a certain level for a sustained period. Most typical terms are 150% of conversion price for 20 consecutive days. Note that under these circumstances the security has appreciated, at a minimum, 50% since being issued.

Provisional Call Feature

In convertible bonds, a feature that allows the issuer to call and redeem the bonds during the non-call period under certain circumstances. Specifically, if the price of the underlying stock exceeds the conversion price by a certain amount for a certain period of time, the issuer may exercise the provisional call feature. The provisional call feature exists to protect the issuer from needing to honor conversions of bonds into common stock at a vastly unfavorable price.
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