sinking fund

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Related to Redemption Fund: sinking fund

Sinking fund

A fund to which money is added on a regular basis that is used to ensure investor confidence that promised payments will be made and that is used to redeem debt securities or preferred stock issues.

Sinking Fund

A fund or account into which a person or company deposits money on a regular basis in order to repay some debt or other liability that will come due in the future. For example, if one has a loan with a balloon maturity of seven years, one may put money into a sinking fund for seven years in order to be ready to pay off the principal when it comes due. Some bonds have sinking fund provisions, requiring the issuer to put money aside to repay bondholders at maturity.

sinking fund

The assets that are set aside for the redemption of stock, the retirement of debt, or the replacement of fixed assets.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Sinking fund.

To ensure there's money on hand to redeem a bond or preferred stock issue, a corporation may establish a separate custodial account, called a sinking fund, to which it adds money on a regular basis.

Or the corporation may be required to establish such a fund to fulfill the terms of its issue. The existence of the fund allows the corporation to present its investments as safer than those issued by a corporation without comparable assets.

However, sinking fund assets may be used to call bonds before they mature, reducing the interest the bondholders expected to receive.

sinking fund

a fund into which periodic payments are made which, with compound INTEREST, will ultimately be sufficient to meet a known future capital commitment or discharge a LIABILITY. Such a fund may be used to finance the replacement of FIXED ASSETS at the end of their useful life or to purchase back company loan stock or DEBENTURES upon maturity See also DEPRECIATION, definition 1.

sinking fund

a fund, into which periodic payments are made, that, with COMPOUND INTEREST, will ultimately be sufficient to meet a known future capital commitment or discharge a LIABILITY. Such a fund may be used to finance the replacement of FIXED ASSETS at the end of their useful life or to purchase back company loan stock or debentures upon maturity

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

sinking fund

Money set aside in a special account to which regular contributions are made by way of additional money and/or interest on the money,with the plans that by a specified date the fund will be sufficient for a particular purpose.Prospective homeowners may set up a sinking fund for a house down payment,and companies usually establish sinking funds to pay off bonds.

References in periodicals archive ?

The Commission has informally agreed to set up an expert group "to deepen the analysis on the possible merits, risks, requirements and obstacles" of setting up a redemption fund and eurobills.aThe group will be composed of experts in law and economics, public finances, financial markets and sovereign debt management.

ECONOMIC GOVERNANCE : DEAL ON TWO PACK' EXPECTED ON 20 FEBRUARY

On the second proposal, where Elisa Ferreira (S&D, Portugal) is the rapporteur, Socialists, Liberals and Greens request commitments towards the setting up of a redemption fund and the issuance of short-term eurobills.

ECONOMIC GOVERNANCE : REDEMPTION FUND STUDY GROUP TO BREAK TWO PACK' DEADLOCK

In this respect, Economic and Monetary Affairs Commissioner Olli Rehn finds it unhelpful that the adoption of a twin proposal precisely to reinforce economic governancea- the so-called two pack' - is "being held hostage" by certain MEPs in exchange for commitments to make proposals in the short term for a redemption fund and eurobills, something he says is "impossible at this stage".

EUROBONDS : MEPS HAMMER ON ABOUT REDEMPTION FUND

"It's a good idea to have a kind of redemption fund and to work toward a more common management of bonds," said Faymann.

EURO CRISIS : AUSTRIA'S CHANCELLOR FAYMANN PUTS WEIGHT BEHIND REDEMPTION FUND

Certain MEPs might therefore shift their objectives: requesting a constitutional expert group be put together to explore the legal consequences of a redemption fund and asking for some form of commitment after the German elections.

ECONOMIC GOVERNANCE : DEAL ON TWO PACK' STILL PENDING

In the blueprint, the EU executive suggests that a European Redemption Fund, a proper fiscal capacity and short-term eurobills - all requiring treaty changes - should be created in the medium term (in the next 18 months to five years) to reinforce the EMU.

EMU/EUROPEAN REDEMPTION FUND : "MISTAKE" TO WAIT FIVE YEARS TO SET UP ERF - VERHOFSTADT

A redemption fund subject to strict conditionality and eurobills could be also be considered, argues the EU executive.

ECONOMIC AND MONETARY UNION : EXEC PROPOSES NEW INSTRUMENT AS FIRST STEP TOWARD FISCAL CAPACITY

If five fill in and 12 take out, this is nothing else but an attempt to avoid the terms eurobond' or redemption fund' and that it is coming from Berlin is not a surprise for me.

INTERVIEW WITH MARTIN SCHULZ, PRESIDENT, EUROPEAN PARLIAMENT : ORGANISE EP VOTING SYSTEM TO ENSURE EURO OPT-OUTS CANNOT BLOCK

Treasury bills and a redemption fund, aimed at pooling sovereign debt in the short term, stay alive in the interim report.

EUROPEAN COUNCIL : SEPARATE WHEAT FROM CHAFF IN VIEW OF FINAL DECEMBER EMU REPORT

The solution, in Schulz's opinion, is the introduction of eurobonds either through a debt redemption fund or by issuing a banking license to the European Stability Mechanism (ESM).aSchulz likened the treaty change debate "to sitting in an airplane that's experiencing serious turbulence, while in the cockpit, they're debating improvements to the engines".

SCHULZ: POLITICAL UNION IS NOT RIGHT ANSWER TO CRISIS NOW

Germany's savings banks in favour of EU debt redemption fund: On 4 September, Georg Fahrenschon president of Germany's Savings Banks Association (DSGV), called on European leaders to "think seriously" about a public debt redemption fund for the eurozone.