sinking fund provision

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 ?
i] = Sinking fund provision for bond i, measured by a dichotomous variable with i zero indicating no sinking fund provision and one indicating the presence of a sinking fund provision
Mitchell examines the joint decision to include a call option, a sinking fund provision or a refunding provision, and the choice of maturity, while Thatcher investigates the decision to issue a two-tiered call option.
The sinking fund provision requires that XYZ retire $25 million in each of the years 1997 to 2000.
The shares have no stated maturity, sinking fund provision or mandatory redemption and are not convertible into any other securities of the company.
2, 1997, under the Improvement or Sinking Fund provision of Alabama Power's Indenture dated Jan.
17, 1995--Alabama Power Company announced today that $20,047,000 principal amount of its 9-1/4 percent series first mortgage bonds due 2021 will be redeemed on January 2, 1996, under the Improvement or Sinking Fund provision of Alabama Power's Indenture dated January 1, 1942, as amended and supplemented, between the company and Chemical Bank, as Trustee.
The Notes will be issued in denominations of $1,000 and have no sinking fund provisions.
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.
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.