Early redemption of a municipal revenue bond because a catastrophe has destroyed the project that provided the revenue source backing the bond.
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The call of a bond that occurs when an asset secured by that bond is destroyed. For example, suppose a company issues a bond to build a factory, with the coupon and principal payments secured by the revenue that factory produces. If that factory burns down, there is nothing securing the future coupon payments, and the issuer may make a catastrophe call to save itself from a liability it may not be able to pay.
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Redemption of a bond because of a disaster. For example, a bond issue collateralized by an airplane may be called if the plane crashes.
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.