hard · Debt Capital Markets bond-instruments-structures

What is the most precise critique of that claim from a single bondholder's perspective?

1. When the bond trades below par the issuer will satisfy the sink via cheaper open-market purchases rather than the par lottery, so an individual holder gains little call protection and may simply face reduced liquidity in a shrinking float
2. The sinking fund forces the issuer to call bonds at par regardless of market price, so a holder bought at 92 is guaranteed a par redemption gain that offsets any credit benefit
3. Because retirement is by lottery, every holder faces a fixed probability of par redemption each year, which makes the bond's effective duration longer than a comparable bullet
4. The sink improves credit only if funded from new debt, so absent refinancing the analyst's premise of falling credit risk is structurally impossible to achieve

Sign up free to see the explanation and track your rank →