Extraordinary Redemption

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.

BREAKING DOWN '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. Mandatory Redemption Schedule

    Specified dates when a bond issuer is required to redeem all ...
  2. Redemption

    The return of an investor's principal in a fixed income security, ...
  3. Callable Bond

    A bond that can be redeemed by the issuer prior to its maturity. ...
  4. Extraordinary Item

    Gains or losses included in a company's financial statements, ...
  5. Call Provision

    A provision on a bond or other fixed-income instrument that allows ...
  6. Term Bond

    Bonds from the same issue that share the same maturity dates. ...
Related Articles
  1. Bonds & Fixed Income

    How To Evaluate Bond Performance

    Learn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk.
  2. Bonds & Fixed Income

    Bond Call Features: Don't Get Caught Off Guard

    Learn why early redemption occurs and how to avoid potential losses.
  3. Home & Auto

    How To Choose The Right Bond For You

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  4. Retirement

    Analyzing The Best Retirement Plans And Investment Options: Bonds

    What they are: Debt securities in which you lend money to an issuer (such as a corporation or government) in exchange for interest payments and the future repayment of the bond’s face value. ...
  5. Bonds & Fixed Income

    The Basics Of Bonds

    Bonds play an important part in your portfolio as you age; learning about them makes good financial sense.
  6. Bonds & Fixed Income

    Savings Bonds For Income And Safety

    Bonds offer undeniable benefits to investors, including safety and tax advantages.
  7. Investing

    Advising FAs: Explaining Bonds to a Client

    Most of us have borrowed money at some point in our lives, and just as people need money, so do companies and governments. Companies need funds to expand into new markets, while governments need ...
  8. Bonds & Fixed Income

    5 Reasons to Invest in Municipal Bonds When the Fed Hikes Rates

    Discover five reasons why investing in municipal bonds after the Fed hikes interest rates, and not before, can be a great way to boost investment income.
  9. Bonds

    What bonds are: Debt securities where you lend money to an issuer (e.g., a corporation or government) in exchange for interest payments and the future repayment of the bond’s face value. ...
  10. Mutual Funds & ETFs

    Why Muni Bonds and Bond Funds are Perfect Together

    Municipal bonds and bond funds differ in several ways, which is partly why they complement each other well.
RELATED FAQS
  1. A corporate bond I own has just been called by the issuer. How can a company legally ...

    Bond issues can contain what is referred to as a call provision, which is a right afforded to the issuing company enabling ... Read Answer >>
  2. Why would an investor opt for a partial redemption as opposed to a full redemption?

    Learn about the difference between a partial redemption and a full redemption, and why an investor might choose to partially, ... Read Answer >>
  3. Under what circumstances might an issuer redeem a callable bond?

    Understand why an interest rate drop usually compels bond issuers to redeem callable bonds and re-issue them at the new, ... Read Answer >>
  4. What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields ... Read Answer >>
  5. An investor with 1,000 shares of the Amazing Growth fund places a redemption order ...

    The correct answer is a. The investor placed her redemption order before the close of the market on Friday, so she will redeem ... Read Answer >>
  6. Which factors most influence fixed income securities?

    Learn about the main factors that impact the price of fixed income securities, and understand the various types of risk associated ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center