make-whole call provision

Make Whole Call Provision

A provision in some bond agreements allowing the issuer to redeem the bond before maturity if it gives bondholders a lump-sum payment equal to the net present value of coupons they would have received, had the bond not been called. A make-whole call provision allows the issuer to reduce the amount of debt on its balance sheet, if need be, while also limiting bondholders' risk.

make-whole call provision

A stipulation in a bond indenture that permits the borrower to redeem a bond prior to maturity by making a lump-sum payment equal to the present value of future interest payments that will not be paid because of the early call. The provision makes the bondholder whole by providing compensation for interest payments that are missed because of an early redemption.
References in periodicals archive ?
The innovative characteristic of a make-whole call provision is that the call price floats inversely with risk-free rates.
Thus, a make-whole call provision improves a firm's financial flexibility by capping the price of a successful bond tender offer.
2) Thus, compared to a fixed-price call provision, up-front costs for a make-whole call provision should be lower.
While it is difficult to quantify the ex post flexibility benefits of a make-whole call provision, quantifying the ex ante cost is feasible.
Additionally, bondholders must be compensated for the fact that a make-whole call provision acts as a cap on the price of a successful tender offer.
One potential explanation is that the decision to incorporate a make-whole call provision is endogenous and this endogeneity biases our estimated coefficients.
Provide the City and financial advisors with any other information deemed necessary, including post-pricing monitoring of trades, calculations associated with make-whole call provisions, and other related financial calculations as the City deems necessary.