medium · Debt Capital Markets
An issuer redeems 35% of its bonds via an equity claw at 108.
If the bonds were originally issued with a 2% Original Issue Discount (OID), how does the redemption affect the issuer's interest expense in the year of the claw?
- It lowers interest expense because OID is only paid if the bond reaches its full maturity.
- The OID is 'refunded' to the issuer because the debt was retired earlier than expected.
- It causes an immediate 'acceleration' of the remaining OID amortization for the redeemed portion, creating a one-time non-cash charge.
- It has no effect because OID is an equity adjustment, not a debt adjustment.
Sign up free to see the explanation and track your rank →
More Debt Capital Markets practice
- In the context of Debt Capital Markets, what is a leverage-based margin ratchet?
- Which officer of a borrower is typically responsible for signing the compliance certificat
- Why is the Administrative Agent's role important for the margin ratchet?
- If a company has a leverage-based pricing grid and SOFR rises significantly while leverage
- What is meant by the 'bond floor' in the context of yield analysis?
- For a bond trading at a discount (below par), which yield measure is typically the same as
- What is a 'call schedule' for a corporate bond?
- If a bond's Yield to Worst is equal to its Yield to Maturity, what can we likely conclude