Make Whole Call (Provision)

Loading the player...

What is a 'Make Whole Call (Provision)'

A make whole call (provision) is a type of call provision on a bond allowing the borrower to pay off remaining debt early. The borrower has to make a lump sum payment derived from a formula based on the net present value (NPV) of future coupon payments that will not be paid because of the call.

BREAKING DOWN 'Make Whole Call (Provision)'

A make whole call will be defined in the indenture. The issuer doesn't expect to have to use this type of provision, but if the issuer does, investors will be compensated, or "made whole." Because the cost can often be significant, such provisions are rarely invoked.

RELATED TERMS
  1. Call Provision

    A provision on a bond or other fixed-income instrument that allows ...
  2. Any-Interest-Date Call

    A municipal bond provision which allows the bond issuer to redeem ...
  3. Soft Call Provision

    A feature added to convertible fixed-income and debt securities. ...
  4. Debt Accordions

    A loan provision which allows the borrower to add additional ...
  5. General Provisions

    A balance sheet item representing funds set aside by a company ...
  6. Provision For Credit Losses - PCL

    In accounting, an estimation of potential losses that a company ...
Related Articles
  1. Professionals

    Provisions for Redeeming Bonds

    CFA Level 1 - Provisions for Redeeming Bonds. Learn the various types of ways a callable bond may be redeemed. Shows when these options could be executed, and provides a sample call.
  2. Retirement

    1. You Are Not Saving

    Dipping into your savings can put a big dent in your future plans. Find out how.
  3. Economics

    What is a Loan Loss Provision?

    Banks set aside loan loss provisions to cover losses from bad loans.
  4. Bonds & Fixed Income

    Explaining Make-Whole Calls

    A make-whole call enables a bond’s issuer to pay off a bond before it reaches its maturity date.
  5. Bonds & Fixed Income

    Bond Call Features: Don't Get Caught Off Guard

    Learn why early redemption occurs and how to avoid potential losses.
  6. Professionals

    Retiring Corporate Bonds

    FINRA Series 7 Online Study Guide, Section 4
  7. Bonds & Fixed Income

    Advanced Bond Concepts: Bond Pricing

    It is important for prospective bond buyers to know how to determine the price of a bond because it will indicate the yield received should the bond be purchased. In this section, we will run ...
  8. Fundamental Analysis

    Calculating Net Present Value at Different Points Using Excel

    Calculating the net present value (NPV) of your investment projects using Excel.
  9. Professionals

    The NPV Profile

    CFA Level 1 - The NPV Profile. Learn how firms can compare projects using an NPV profile graph. Provides a graphical example of how NPV relates to IRR.
  10. Professionals

    Net Present Value

    NPVs reveal exactly how profitable a project will be in comparison to alternatives.
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. What's the difference between accrued expenses and provisions?

    Read about the differences between accrued expenses and provisions, and why a company might record one over the other in ... Read Answer >>
  3. What does it mean when a bond has a put option?

    A put option on a bond is a provision that allows the holder of the bond the right to force the issuer to pay back the principal ... Read Answer >>
  4. How do you use net present value to calculate a capital budget?

    Learn about the net present value calculation (NPV) and how the NPV rule is used in capital budgeting to compare the expected ... Read Answer >>
  5. Do you discount working capital in net present value (NPV)?

    Learn why changes in net working capital (NPV) should be included in net present value calculations for analyzing a project's ... Read Answer >>
  6. What is the formula for calculating net present value (NPV)?

    Learn about the formula for net present value (NPV) and how this calculation is used in capital budgeting to determine which ... Read Answer >>
Hot Definitions
  1. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  2. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  3. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center