Bond Corporate Actions

What is a Partial Call?

• What it means: The issuer (the company or government that sold the bond) decides to pay back part of the bonds before the scheduled maturity date.
• In practice: Only a portion of the total bonds are “called,” not all. If you own the bond, you might get part of your investment back earlier than expected, while the rest continues to earn interest until maturity (or until it’s called again).

What is a Full Call?

• What it means: The issuer pays back the entire bond issue early, before maturity.
• In practice: All investors get their principal returned, and the bond stops paying interest from that point onward.

What is a Partial Mandatory Put?

• What it means: Instead of the issuer choosing, the bond’s terms require that a portion of the bonds be “put” (returned) to the issuer on a certain date.
• In practice: Investors are forced to sell back part of their holdings and get their money back early.

What is Pre-Refunding / Defeasance?

• What it means: The issuer sets aside money (often in safe U.S. Treasury securities) to fully pay off the bonds in the future.
• In practice: The bonds are essentially “paid for” in advance, and the credit risk of the issuer is replaced by the safety of the escrowed Treasuries. The bonds still exist, but they are no longer backed by the issuer’s business or taxes.

What is a Partial Redemption with Pool Factor Reduction?

• What it means: Only part of the bond issue is paid back early, and the amount owed on the remaining bonds is reduced.
• In practice: If you owned $1,000 face value of a bond, you might suddenly only have $800 face value outstanding, with the $200 paid back to you.

What is a Tender Offer?

• What it means: The issuer (or sometimes another party) offers to buy back bonds from investors, usually at a set price.
• In practice: It’s optional. You can choose to sell your bond back or keep it.

What is a Repurchase Offer?

• What it means: Similar to a tender offer, but typically done through a bidding process where investors can submit the price at which they’re willing to sell.
• In practice: The issuer reviews bids and decides how many bonds to buy back and at what price.

What is Capitalization?

• What it means: Instead of paying cash interest, the issuer adds the unpaid interest onto the bond’s principal balance.
• In practice: Your bond grows in size, but you don’t get cash right away. You’ll receive more later, since interest has been rolled into the amount owed.