medium · Debt Capital Markets
In a 3-year non-call period (NC3), an issuer goes public in month 18.
If they exercise the equity clawback, how does this affect the 'yield-to-worst' (YTW) calculation for the remaining bondholders?
- The YTW is immediately fixed to the equity claw premium price of 108.50.
- The YTW remains identical to the YTM because the claw is only a partial redemption.
- It has no effect because YTW only considers the final maturity of the instrument.
- The YTW may shift if the exercise of the claw changes the likelihood of the remaining bonds being called at the NC3 date.
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