Financial

redemption premium

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.
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redemption premium

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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References in periodicals archive
To facilitate the company's compliance with Nasdaq's requirements, the holders of the Series C and E convertible preferred stock consented to having the first USD3.8m of net proceeds go to working capital of the company before redemption of such preferred stock in consideration for a reduction in the exercise price of the July 2016 warrants to USD1.43 and the May 2016 warrants to USD1.86 and a 15% increase in the redemption premium of the Series E convertible preferred stock if not redeemed on or before 25 January 2017.
In a BSE filing, Suzlon said: "It has been successfully repaid in cash, FCCBs worth USD 28.8 million in principal amount along with the applicable 8.7 percent redemption premium".
This is comprised of the CAN 25.00 per share original issue price plus a CAN 1.00 per share redemption premium.
Carriage Services said its intention remains to use these proceeds to refinance an existing Revolving Credit, redeem its existing 7.875% senior notes, pay the associated redemption premium, pay other transaction related fees and expenses, and provide for future corporate needs.
The option price reflects the aggregate of the nominal amount of the REBs, their redemption premium and coupon payments, and all other outstanding amounts.
According to the company, it intends to use the net proceeds from the facility, which is anticipated to be approximately USD530m after the original issue discount, fees and expenses, to redeem all of the USD500m of outstanding 8.25% senior notes due 2017 and to pay the associated redemption premium and accrued and unpaid interest.
Net proceeds of the credit facility are expected to be about USD530m after the original issue discount, fees and expenses, which will be used to redeem all of the USD500m outstanding 8.25% senior notes due 2017 and to pay the related redemption premium and accrued and unpaid interest.
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