Bond Maturities

When a bond matures, the principal payment and the last semi-annual interest payment are due. Corporations will select to issue bonds with the maturity type that best fits their needs, based on the interest rate environment and marketability.

Term Maturity

A term bond is the most common type of corporate bond issue. With a term bond, the entire principal amount becomes due on a specific date.   For example, if XYZ corporation  issued  $100,000,000 worth of 8% bonds due 6/1/2010 the entire $100,000,000 would be due to bondholders on June 1st  2010. On June 1st bondholders would also receive their last semi-annual interest payment and their principal payment.

Serial Maturity

A serial bond issue is one that has a portion of the issue maturing over a series of years. Traditionally serial bonds have larger portions of the principal maturing in later years. The Portion of the bonds maturing in later years will carry a higher yield to maturity because investors who have their money at risk longer will demand a higher interest rate.

Balloon Maturity

A balloon issue contains a maturity schedule that repays a portion of the issue’s principal over a number of years, just like a serial issue. However, with a balloon maturity the largest portion of the principal amount is due on the last date.

Series Issue

With a series issue, corporations may elect to spread the issuance of the bonds over a period of several years. This will give the corporation the flexibility to borrow money to meet its goals as its needs change.

Introduction

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Frequently Asked Questions
  1. What Was the First Company to Issue Stock?

    The Dutch East India Co. held an IPO in 1602, making it the first company to issue stock.
  2. When Does a Corporation Decide to Refinance Debt?

    Favorable market conditions or the strengthening of a credit rating may lead to refinancing.
  3. What Is an Odd-Lot Buyback?

    Odd-lot buybacks involve lots of less than 100 shares. Learn how companies get these shares back.
  4. Can I buy a house directly from Fannie Mae (FNMA)?

    Yes, Fannie Mae does sell properties it's foreclosed on; each property is sold in "as is" condition.
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