sinking fund


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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.

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

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 ?
Sinking fund accumulations, which are placed on top of proceeds from the resale of the property, are quantitatively equal to the expected depreciation of the property and are formed by reinvesting a part of net operating income into the sinking fund.
As soon as it takes effect sometime next year, the circular will be retroactive, which means that the companies or consortia operating producing fields like the Malampaya--which has been operating since 2001--will be required to submit their abandonment program within a particular time frame and to start setting up a sinking fund for this purpose.
Furthermore, they claim botched building work has potentially left the building structurally unsound - and say repair work should not be paid for using the sinking fund.
After the initial offering, an increase in interest rates provides the issuer of sinking fund bonds with some favorable options.
85% base rate, as of the first sinking fund date by the amounts indicated and remain at the new rate for the life of the issue.
The sinking fund for asset replacement was designed to achieve two important objectives.
Many issuers stay well ahead of their sinking fund requirements.
Each participating district has covenanted to budget, appropriate, and punctually pay such monies to cover note interest and sinking fund payments annually.
If the city had to levy an interest and sinking fund tax to meet detention center related debt obligations, officials estimate that the overall tax rate would have to double over the current operations and maintenance tax rate, which Fitch believes would be extremely difficult to impose.
The SCRF requirement is defined as the lesser of the sum of the SCRF requirements for all bonds outstanding, or the maximum amount of principal and interest becoming due on the outstanding debt by reason of maturity or a required sinking fund payment in any given year.
The bonds are term bonds with mandatory sinking fund payments June 1, 2007-2015 with semi-annual interest payments due Dec.