Sinking fund requirement

Sinking fund requirement

A condition included in some corporate bond indentures that requires the issuer to retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.

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.
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In our example, the issuer could deliver the $25 million to the trustee with instructions to satisfy some future sinking fund requirement. If interest rates happen to be relatively low in 1997, this designation will have lowered the value of each bondholder's position: without the designation, $100 million of the bonds would have been outstanding and each investor would have expected one-fourth of his holding to be called through the $25 million sinking fund call.
The "double-up" and "triple-up" options allow an issuer to call a total of twice or three times the mandatory sinking fund requirement on each date.
Since the "Sinking Fund Redemption Price" is almost always par, this provision allows XYZ to apply its $25 million of treasury bonds against any future sinking fund requirement. Say that it designates the $25 million to the requirement in 1999.
Meeting the Sinking Fund Requirement Through Market Purchases or Designations
If, on the other hand, the issuer chooses to satisfy the sinking fund requirement by designations, the resulting value function will be the same as Equation (3a), except that the investor holding argument will be larger than I - (|F.sub.t~ - |a.sub.t~) and the treasury holding argument will not be greater than T.
* Long-term debt disclosures are incomplete because they omit dates of maturity, collateral, interest rates, and sinking fund requirements for all long-term borrowings for each of the five years following the date of the last balance sheet presented per SFAS No.
This occurs without controlling for differences in bond features such as ratings, call options, insurance, sinking fund requirements, or years-to-maturity.
Using this research design, the [b.sub.0], [b.sub.1], and [b.sub.2] coefficients can also be used to measure the pretax yields for tax-exempt bonds ([b.sub.0]), AMT bonds ([b.sub.0] + [b.sub.1]), and taxable bonds ([b.sub.0] + [b.sub.2]), after subtracting the risk premiums associated with differences in bond ratings, call provisions, sinking fund requirements, insurance, and years-to-maturity These risk-adjusted yields can then be used to estimate the implicit taxes in tax-exempt and AMT bond yields.
In addition, bonds with sinking fund requirements ([b.sub.6] > 0) and insured bonds ([b.sub.7] > 0) have higher average yields.
Third, risk-adjusted pretax yields are estimated from a regression model that removes the estimated risk premiums associated with differences in bond ratings, call provisions, sinking fund requirements, insurance, and years-to-maturity.
Judge Lifland rejected this argument, pointing out that maturity dates, interest rates and sinking fund requirements were all changed with the new debt.
Maturities and sinking fund requirements on long-term debt are as follows: 19X2 $10,000 19X3 10,000 19X4 10,000 19X5 65,000 19X6 15,000 19X7-19X8 40,000 $150,000