Income Bond


DEFINITION of 'Income Bond'

A type of debt security in which only the face value of the bond is promised to be paid to the investor, with any coupon payments being paid only if the issuing company has enough earnings to pay for the coupon payment.


The income bond is a somewhat rare financial instrument which generally serves a corporate purpose similar to that of preferred shares. It may be structured so that unpaid interest payments accumulate and become due upon maturity of the bond issue, but this is usually not the case; as such, it can be a useful tool to help a corporation avoid bankruptcy during times of poor financial health or ongoing reorganization.

  1. Coupon

    The annual interest rate paid on a bond, expressed as a percentage ...
  2. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  3. Bond

    A debt investment in which an investor loans money to an entity ...
  4. Reorganization

    A process designed to revive a financially troubled or bankrupt ...
  5. Maturity Date

    The date on which the principal amount of a note, draft, acceptance ...
  6. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
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