Reset bonds

Reset bonds

Bonds that allow the initial interest rates to be adjusted on specific dates in order that the bonds trade at the value they had when they were issued.

Reset Bond

A bond that, on designated days, increases its coupon rate to bring its market value back to its original value. For example, suppose a bond is issued with a price of $1,000 at a coupon of 5%. If the bond's price declines for any reason to $900 by the first designated day, the coupon rate is increased to 7% or whatever percentage will bring the price back up to $1,000. Reset bonds are structured this way to protect bondholders' investment, but they can create hardship for the issuer. The extra coupon rate has been known to cause an issuer to go into bankruptcy.
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References in periodicals archive ?
UBM plc announces repayment of [pounds]75m Floating Rate Reset Bonds due 2028
If remarketing is necessitated, this means at least part of the up-front cost savings the treasurer thought the putable/callable reset bonds offered will be lost.
1 billion of multi-annual put bonds with maturities between one and three years and $320 million of 'Windows' weekly reset bonds.
UBM raised [pounds sterling]75m though the issue of 20 year Floating Rate Reset Bonds at the
As of March 31, 2011 Ascension's capital structure consisted of $407 million of weekly variable rate demand bonds, $227 million of annual put bonds, $988 million of multi-annual put bonds with maturities between one and three years and $320 million of "Windows" weekly reset bonds.
Upon successful execution of the series 2010 plan of finance, Ascension's capital structure will consist of $497 million of weekly variable rate demand bonds, $247 million of annual put bonds, $694 million of multi-annual put bonds with maturities between one and three years and $318 million of Windows weekly reset bonds.