call protection

Call Protection

A protective provision of a callable security prohibiting the issuer from calling back the security for a period early in its life.

Notes:

The call protection is advantageous to investors because it prevents the issuer from forcing redemption early on in the life of a security. This means that investors will have a minimum number or years, regardless of how poor the market becomes, to reap the benefits of the security.

The period for which the bond is protected is known as the "deferment period" or the "cushion".

See also: Callable Bond, Callable Common Stock, Deferment Period, Forced Conversion, Sweetener

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Call protection

A feature of some callable bonds that establishes an initial period when the bonds may not be called.

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call protection

The prohibition against an issuer's calling a bond from an investor during the early years of the security's life. Municipals and industrial bonds usually have ten years of call protection, while protection on utility debt is often limited to five years. A longer period of call protection is advantageous to the investor because calls nearly always occur during periods of reduced interest rates. Also called cushion. See also noncallable (NC), nonrefundable (NR).