M2 EQUITYBITES-February 13, 2019-Cherry notifies on early redemption of senior secured callable bonds
Global Banking News-February 13, 2019-Cherry notifies on early redemption of senior secured callable bonds
NORDIC BUSINESS REPORT-February 13, 2019-Cherry notifies on early redemption of senior secured callable bonds
"Because homeowners can refinance a mortgage without penalty but the lender cannot do the same, holding a mortgage is essentially like issuing callable bonds
. If rates decline, the homeowner can simply refinance and take advantage of lower borrowing costs.
Despite its financial prowess, WSJ doesn't even mention risk-mitigating tools like balancing long term with short term, adjustable balanced with fixed, and callable bonds
These consist of P10.0 billion callable bonds
due in 2027, P10.0 billion multiple put corporate bonds maturing in 2021, P10.0 billion putable bonds maturing in 2017 and P10.0 billion fixed rate bonds maturing in 2019.
These include callable bonds
, shortduration bonds, high-coupon bonds, defensive bonds and bonds with short-term triggers.
The agency also gave its BBB rating to the bank's subordinated callable bonds
due 27 July 2017 issued in the amount of JPY10bn (USD129m/EUR94m).
Although this is true of most bonds, this is not the case with callable bonds
. In short, when interest rates fall, the risk of the bond being "called away" increases.
Second, we exclude callable bonds
, Rule 144A issues, and utility issues from the sample.
As postulated by Taggart and Bodie (1978) and Barnea, Hauge, and Senbet (1980), risk incentive agency costs can be reduced by issuing callable bonds
because the call option value (i.e., stockholders' wealth) declines as management shifts to riskier projects that reduce firm value.