medium · Corporate Credit Analysis cap-structure
A high-yield bond has an 'NC-3' call schedule. The bond has an 8% coupon and was issued 2.5 years ago. The issuer wants to refinance now because market rates have dropped to 5%.
What is the most likely cost to the issuer to retire the bond today?
- The issuer is contractually barred from retiring this debt during the NC period entirely.
- The issuer must pay a 'Make-Whole' premium based on the present value of the remaining coupons.
- The issuer can call the bond immediately today at a fixed price of 104% of the stated par value.
- The issuer can call the bond today at par value, or 100% of face, with no premium owed to bondholders.
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