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Redemption Premium
(redirected from Redemption Premiums)

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Redemption Premium
Money over and above the face value of a callable bond that the issuer pays to bondholders if the bond is called. A callable bond is a bond that the issuer is permitted to redeem or repay before the maturity date, depriving the bondholder of future coupon payments. Usually the issuer does this if it can reissue the same amount of debt at a lower interest rate. The redemption premium exists to compensate bondholders for some of their lost interest payments. It is especially useful if they can only reinvest in securities with a lower return rate. The redemption premium is also called the call premium.

redemption premium


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In January 1994, the Securities and Exchange Commission staff concluded that redemption premiums after that date should be reflected as a return to the preferred stockholders similar to the treatment of dividends paid to such holders.
In the opinion of Chris Berens, anticipated receipts from escrow fund investments will be sufficient to pay principal, interest and any redemption premiums on the refunded bonds when due.
In January 1994, the Securities and Exchange Commission staff concluded that redemption premiums after that date should be reflected as a return to the preferred stockholders similar to the treatment of dividends paid to such holders.
 
 
 
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