Early Extinguishment of Debt

Early Extinguishment of Debt

The payment of a debt in full before it is due. Early extinguishment of debt is good for the borrower because it relieves him/her of the debt, but it deprives the lender of interest he/she would have received otherwise. As a result, some lenders attach prepayment penalties to loans to disincentivize early extinguishment. Early extinguishment of debt is also called prepayment, which has other meanings as well. See also: Prepayment risk.
References in periodicals archive ?
The accompanying press release presents Adjusted EBITDA, which represents income (loss) from continuing operations before non-vehicle related depreciation and amortization, any impairment charges, restructuring and other related charges, early extinguishment of debt costs, non-vehicle related interest, transaction-related costs, net charges for unprecedented personal-injury legal matters, non-operational charges related to shareholder activist activity, gain on sale of equity method investment in Anji and income taxes.
Net income was positively impacted by a gain of $10.7M, representing the change of fair value of the company's derivative contracts and negatively impacted by a loss of $1.8M on early extinguishment of debt. Production totaled 12.6 Bcfe in the quarter, or an average of approximately 138,200 Mcfe per day, versus 5.5 Bcfe, or an average of approximately 60,600 Mcfe per day, in the prior year period.
First quarter 2019 after-tax special items include a $345 million noncash settlement charge related to the transfer of pension assets and liabilities through the purchase of a group annuity contract, a $15 million legal charge and a $9 million charge related to the early extinguishment of debt. First quarter 2018 after-tax special items include $21 million for environmental remediation charges and a $15 million benefit from product remediation insurance proceeds.
Intelsat reported EBITDA1, or earnings before net interest, gain on early extinguishment of debt, taxes and depreciation and amortization, of USD 372.8 million and Adjusted EBITDA1 of USD 380.3 million, or 72 percent of revenue, for the three months ended March 31, 2019.
Finally, related to the redemption of the 2019 notes BPLP will record a loss from early extinguishment of debt in the fourth quarter of 2018.
It reported Operating Earnings (a non-GAAP financial measure defined below) of $58.3 million, or $0.45 per diluted share of common stock, for the three months ended September 30, 2018; excluding the realized loss on early extinguishment of debt (described below), Operating Earnings were $60.9 million, or $0.47 per diluted share of common stock for the three months ended September 30, 2018; generated $77.5 million of net interest income during the quarter from the Company's $4.8 billion commercial real estate loan portfolio; and committed $285.0 million to new commercial real estate loans ($87.0 million of which was funded at closing) and funded an additional $96.9 million for loans closed prior to the quarter.
Fourth quarter 2017 results include a USD 23.2 million loss on early extinguishment of debt, as well as a USD 47.2 million charge related to Federal tax reform.1 Adjusted earnings per diluted share for the fourth quarter 2017 was USD 0.72, a 10.7% increase from the third quarter 2017 and a 32.4% increase from the fourth quarter 2016.
Second, looking at data from after SFAS 145 was issued, Abhijit Barua found that "companies have an unusually high propensity to report gains from the early retirement of debt during periods of economic recession, as well as in the fourth quarter of a fiscal year" ("Early Extinguishment of Debt: Rational Debt Management or Earnings Management?" CPA Journal, May 2013, http://bit.ly/2xQ4ane).
Additionally, a charge for loss from early extinguishment of debt of approximately $32 million contributed to a slight net loss in the quarter.
The GAAP results for the fourth quarter 2015 include two special items totaling USD25 million in pre-tax income: a net gain of USD33 million from the early extinguishment of debt and USD8 million revenue reduction from the resolution of a flying contract matter.
The combination of Hartford's Talcott Resolution--annuity and life insurance business it placed into run-off more than a year ago to concentrate on P&C--and charges for early extinguishment of debt and good-will write off produced a net loss of $652 million.
The results for the second quarter and the first six months of 2012 included a charge for the loss on the early extinguishment of debt of $19.9 million, which was a result of the refinancing of the credit facility and the early redemption of the senior secured notes.
Full browser ?