Bugden though said there is still time as the
sinking fund is created over 10 and up to 20 years.
If applicable, the indenture states conversion and call privileges, sinking fund requirements, restrictions as to the payment of dividends, and the maximum debt to equity ratio permitted by the borrower.
Sinking fund bonds require the issuer to make periodic cash contributions to a sinking fund trustee.
A company that needs to borrow should consider issuing sinking fund bonds.
But the advantages to indexing principal repayments are less obvious, at least partly because in most cases corporate issuers retain some flexibility to increase principal repayments in response to decreases in interest rates either by making optional redemptions or by exercising the option (when it is available) to "double up" on sinking fund payments.
This paper describes ISFDs, characterizes the interest-rate-contingent sinking fund in terms of a strip of European call options and a strip of European put options, develops a contingent claims model for valuing ISFDs and the implicit options imbedded in the contingent sinking fund, and demonstrates the usefulness of ISFDs as an asset-liability management tool.
The consultants advised that if the town 1) followed a consistent plan for financing asset purchases and 2) made annual investments into a sinking fund for asset replacement, the total cost to taxpayers could be minimized and the tax burden stabilized.
The analysis looks at debt service costs associated with alternative financing arrangements, as well as the cost of providing for a sinking fund for asset replacement.
This fact can be explained by the Myers |10~ argument that sinking funds are designed to "reduce creditors' exposure in parallel with the expected decline in the value of assets in place.
The Prevalence of Sinking Fund Provisions as a Functions of Credit Rating Number of Number With % With Rating Observations Sinking Funds Sinking Funds Aaa 14 1 7.
