sinking fund

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Sinking fund

A fund to which money is added on a regular basis that is used to ensure investor confidence that promised payments will be made and that is used to redeem debt securities or preferred stock issues.

Sinking Fund

A fund or account into which a person or company deposits money on a regular basis in order to repay some debt or other liability that will come due in the future. For example, if one has a loan with a balloon maturity of seven years, one may put money into a sinking fund for seven years in order to be ready to pay off the principal when it comes due. Some bonds have sinking fund provisions, requiring the issuer to put money aside to repay bondholders at maturity.

sinking fund

The assets that are set aside for the redemption of stock, the retirement of debt, or the replacement of fixed assets.

Sinking fund.

To ensure there's money on hand to redeem a bond or preferred stock issue, a corporation may establish a separate custodial account, called a sinking fund, to which it adds money on a regular basis.

Or the corporation may be required to establish such a fund to fulfill the terms of its issue. The existence of the fund allows the corporation to present its investments as safer than those issued by a corporation without comparable assets.

However, sinking fund assets may be used to call bonds before they mature, reducing the interest the bondholders expected to receive.

sinking fund

a fund into which periodic payments are made which, with compound INTEREST, will ultimately be sufficient to meet a known future capital commitment or discharge a LIABILITY. Such a fund may be used to finance the replacement of FIXED ASSETS at the end of their useful life or to purchase back company loan stock or DEBENTURES upon maturity See also DEPRECIATION, definition 1.

sinking fund

a fund, into which periodic payments are made, that, with COMPOUND INTEREST, will ultimately be sufficient to meet a known future capital commitment or discharge a LIABILITY. Such a fund may be used to finance the replacement of FIXED ASSETS at the end of their useful life or to purchase back company loan stock or debentures upon maturity

sinking fund

Money set aside in a special account to which regular contributions are made by way of additional money and/or interest on the money,with the plans that by a specified date the fund will be sufficient for a particular purpose.Prospective homeowners may set up a sinking fund for a house down payment,and companies usually establish sinking funds to pay off bonds.

References in periodicals archive ?
The Commission has informally agreed to set up an expert group "to deepen the analysis on the possible merits, risks, requirements and obstacles" of setting up a redemption fund and eurobills.
The content of its first draft in December, which stated that setting up a redemption fund would require a treaty change and can therefore only be a medium-term objective, was deemed insufficient.
She suggests strict conditionality linked toafiscal and structural efforts as well as posting collateral in order to limit moral hazard when setting up a temporary redemption fund.
Excess tax increment revenues held by the trustee in the revenue and redemption funds totaling $1.
Certain MEPs might therefore shift their objectives: requesting a constitutional expert group be put together to explore the legal consequences of a redemption fund and asking for some form of commitment after the German elections.
Surplus pledged tax increment revenue generated during the interest only period following issuance accumulated in the redemption fund pursuant to the trust indenture, providing a cushion to service debt in years when a pledged revenue deficiency has existed.
Reacting to the European Commission's blueprint to reinforce the Economic and Monetary Union (EMU), ALDE leader Guy Verhofstadt (Belgium) said it would be "a big mistake" to wait five years to have a treaty change to create a European Redemption Fund.
In a blueprint, European Commission President Jose Manuel Barroso suggests that a European Redemption Fund, a proper fiscal capacity and short-term eurobills - all requiring treaty changes - should be created in the medium term to reinforce the Economic and Monetary Union (EMU).
The Supplement will amend the Indenture to provide a mechanism through which the proceeds from a sale of student loans may be directly deposited into a special redemption fund and applied to redemption of all outstanding bonds of series 1991, 1992, 1993, 1995 and 1997 (the Prior Bonds).
We have no majority for eurobonds [in Germany], therefore I talk about a redemption fund or a banking licence for the European Stability Mechanism.
Treasury bills and a redemption fund, aimed at pooling sovereign debt in the short term, stay alive in the interim report.