easy · Debt Capital Markets credit-ratings-risk
What is the primary difference between a voluntary prepayment and a mandatory prepayment?
- Voluntary prepayments must always be remitted at a stated contractual call premium, whereas mandatory prepayments are executed at par.
- Mandatory prepayments apply only to the accrued interest component, while voluntary prepayments are confined to reducing outstanding principal.
- Mandatory prepayments are required by the credit agreement upon specific events, while voluntary prepayments are at the borrower's discretion.
- Only voluntary prepayments genuinely reduce the aggregate principal indebtedness that remains outstanding on the borrower's consolidated balance sheet.
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