Sinking fund provisions

PrepNuggets

Reducing credit risk of a bond issue by requiring the issuer to retire a portion of the bond’s outstanding principal each year.

To retire the outstanding bonds, the issuer can:

(a) Randomly choose from outstanding bonds pool (Redeem at par value), or

(b) Buy back the bonds from open market (Redeem at market price)

Synonyms:
Sinking fund arrangements