Balloon maturity

Balloon maturity

Any large principal payment due at maturity for a bond or loan with or without a sinking fund requirement.

Balloon Maturity

A provision in some bond agreements in which a large number of bonds comes due at the same time, usually at maturity. Balloon maturity occurs only in bonds without a sinking fund provision; rather than retiring part of the principal at different times, balloon maturity returns most or all of the principal on a single date. Issuers of bonds with balloon maturities can have difficulty in repayment if they have not set aside a sufficient amount of money.
References in periodicals archive ?
The term facility provides for rapid deleveraging in the base case with strong prospects for refinancing the balloon maturity even if revenues are reduced and interest rates rise.
Morningstar cited a large number of loans that are current but may default in coming months since they may not be able to secure adequate take-out financing at balloon maturity.
The delinquency rate is expected to rise in coming months, however, as the 2007 vintage loans that were originated under the weakest underwriting standards start to reach their five-year balloon maturity dates.
We also cannot rule out additional store consolidation, closings and potential bankruptcies along with growing balloon maturity default risk as retail collateral continues to suffer from the experienced decline.
Unlike ARMs - another low-cost alternative to fixed-rate mortgages (FRMs) - a borrower's monthly payments are known with certainly, out until the balloon maturity date, from the moment the loan is originated.