sinking fund provision

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Sinking Fund Provision

A provision in some bond indentures requiring the issuer to put money aside to repay bondholders at maturity. In bonds with such a provision, a fund or account is set up into which an issuer deposits money on a regular basis to repay the bond when it matures. See also: Sinking Fund Bond.

sinking fund provision

A stipulation in many bond indentures that the borrower retire a certain proportion of the debt annually. The retirement may be effected by calling the bonds from the investors (if interest rates have declined) or by purchasing the bonds in the open market (if interest rates have increased). This orderly retirement may be advantageous to a bondholder because it creates some liquidity; however, it also may cause the holder to give up a high-yielding bond at the call price (often at par) during a period of reduced interest rates. Also called bond sinking fund. Compare doubling option. See also funnel sinking fund.
References in periodicals archive ?
The Notes will be issued in denominations of $1,000 and have no sinking fund provisions.
Call and sinking fund provisions also influence bond betas since both alter the duration of the bond, and bond betas are increasing functions of duration.
Sinking fund provisions can serve as substitutes for call provisions (Kalotay and Williams (1992) and Ogden (1988)).
Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, which can be a negative feature when interest rates decline.
The redemption will be made by Deutsche Bank Trust Company Americas, formerly Bankers Trust Company, as trustee pursuant to the sinking fund provisions of BGE's mortgage.
Many corporate bond indentures contain sinking fund provisions.
Financial Derivatives Toolbox: Pricing and sensitivity calculations for sinking fund provisions, range bonds, and step up/down coupon bonds
They will not be subject to redemption prior to their maturity and will not have the benefit of any sinking fund provisions.
s (NYSE:FE) subsidiary, The Toledo Edison Company, pursuant to sinking fund provisions of its 8% Series First Mortgage Bonds due 2003, will redeem $400,000 of the bonds on November 1, 1999.
s Toledo Edison Company subsidiary, pursuant to sinking fund provisions of its 8% Series First Mortgage Bonds due 2003, will redeem $400,000 of the bonds on November 1, 2002.
s (NYSE:FE) subsidiary, The Cleveland Electric Illuminating Company, pursuant to sinking fund provisions of its $90 Series S Preferred Stock, will redeem 18,750 shares on November 1, 1999, at a price of $1,000 per share plus accrued dividends up to the date of redemption.
s (NYSE: FE) subsidiary, The Cleveland Electric Illuminating Company, pursuant to the sinking fund provisions of its $90.