What does make whole at 50 mean?
Make whole calls can be exercised at any time prior to maturity. For example, when MetLife Inc. issued its 6.75% seven-year bond in May 2009, it set a make whole spread of 50 basis points, or 0.50%1. Its $100.00 par value was based on a yield spread of 375 to a Treasury note of comparable maturity.
How is make whole calculated?
A make-whole call provision is a type of call provision on a bond allowing the issuer to pay off remaining debt early. The payment is derived from a formula based on the net present value (NPV) of previously scheduled coupon payments and the principal that the investor would have received.
How is make whole premium calculated?
With a make-whole call, the call price is calculated as the maximum of the par value and the present value of the bond’s remaining payments discounted at the prevailing risk-free rate plus a pre-specified spread known as the make-whole premium.
What does make whole at 30 mean?
A make-whole call provision means that the bond can be called at any time (on short notice – generally 30 or so days), and that the issuer will pay the present value of the remaining cash flows to investors.
What is make-whole amount?
Make-Whole Amount means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero.
What is interest make whole?
If upon full repayment of the Obligations, the aggregate amount of interest accrued on the Notes (whether paid at the time of full repayment of the Obligations or previously) is less than the Minimum Interest Amount, the Borrower shall pay to the Buyer an amount equal to such shortfall.
What is make whole amount?
What is a make-whole agreement?
A make-whole call is a type of call provi- sion in a bond allowing the borrower to pay off remaining debt early. The borrow- er has to make a lump sum payment to the holder derived from an earlier agreed- upon formula based on the net present value (NPV) of future coupon payments not paid because of the call.
What is a make whole claim?
Make-Whole Claims in Bankruptcy By modifying the “perfect tender in time rule,” make-whole provisions allow debtors to repay debt in advance of stated maturity, in exchange for a predetermined premium, usually based on the discounted value of the stream of future scheduled interest payments.
What is interestinterest make-whole?
Interest Make-Whole: Provision that provides a premium based on remaining contractual cash flows (either till maturity or some point in the future) discounted at a specified small spread (usually 30-60 bps, most commonly 50 bps) over the then-current US Treasury rate.
What interest rate should I use for a Make-Whole provision?
Use the interest rate on a loan as the interest rate for your make-whole provision. However, if you have a contract for monthly payments without an interest rate, you will need to assume a rate for the future cash flow. An industry standard for a medium risk rate is 10 percent.
How do you calculate whole premium on bonds?
Make Whole Premium 1 the present values of each remaining interest payment on the bonds for the period from the redemption date through the… 2 the principal amount of the bonds. More
What happens to make-whole call options when interest rates drop?
When rates have decreased or are trending lower, a company has an added incentive to exercise make-whole call provisions. If interest rates have dropped, then issuers of corporate bonds can issue new bonds at a lower rate of interest. These new bonds require lower coupon payments to their investors.