Extraordinary Redemption

AAA

DEFINITION of 'Extraordinary Redemption'

A provision that gives a bond issuer the right to call its bonds due to an unusual one-time occurrence, as specified in the offering statement. Extraordinary redemptions, also called "extraordinary calls," occur when bond proceeds aren't spent according to schedule, when bond proceeds are used in a way that makes nontaxable bond interest taxable, or when a catastrophe destroys the project being financed, among other reasons.

INVESTOPEDIA EXPLAINS 'Extraordinary Redemption'

There are two types of extraordinary redemptions: extraordinary mandatory redemptions and extraordinary optional redemptions. Some municipal bonds are issued with an extraordinary redemption provision. An extraordinary redemption means the issuer pays the holder the bond's face value plus accrued interest. A more common circumstance under which a bond would be called, assuming it is provided for in the offering statement, is a drop in interest rates that allows the issuer to refinance its project by issuing new bonds at a lower rate.

RELATED TERMS
  1. Mandatorily Redeemable Shares

    Shares owned by an individual or entity which are required to ...
  2. Extraordinary Repairs

    Unusually extensive maintenance work performed on a piece of ...
  3. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  4. Deferment Period

    1. A time during which a borrower does not have to pay interest ...
  5. Mandatory Redemption Schedule

    Specified dates when a bond issuer is required to redeem all ...
  6. Call

    1. The period of time between the opening and closing of some ...
Related Articles
  1. Bond Call Features: Don't Get Caught ...
    Bonds & Fixed Income

    Bond Call Features: Don't Get Caught ...

  2. When Your Bond Comes Calling
    Bonds & Fixed Income

    When Your Bond Comes Calling

  3. Callable Bonds: Leading A Double Life
    Options & Futures

    Callable Bonds: Leading A Double Life

  4. 5 Basic Things To Know About Bonds
    Bonds & Fixed Income

    5 Basic Things To Know About Bonds

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center