Many companies will have to retire their bonds, at some point. The question is: how? There are many ways that a company may choose to do this. We’re going to take a look at four of them in this blog post!
1) Paying off the bond through maturity – This is when the company pays off its bond on time and it’s retired right away.
2) Redeeming the bond by other means – If there is a call provision for redemption, then it can be redeemed before its due date. This would also include buying back or exchanging the debt with another one from an institution or individual holder.
3) Refinancing- A company may refinance their debt so that the bondholders agree to lower interest rates or different terms.
And last but not least, Deferring
Sometimes companies will just defer their bonds through maturity for a certain period of time and then resume payments on them when they’re ready. This is called an amortization schedule with deferred interest (ASDI). The company may retire its debt by paying off it, redeeming it in other ways such as buying back or exchanging it with another one from an institution or individual holder, refinancing so that the bondholders agree to lower interests rates or different terms, deferring its maturing debt until later – this is done most often when there are ASDI’s which involve postponing some of the interest