To exercise a call option ahead of the bond maturity date means the bond issuer has an obligation to pay both the principle and interest to end the borrowing/lending status between the bond issuer and the investor.
For example, Company A has issued a bond of 1 year maturity but after 8 months, the company decides to exercise a call option. The company is obligated to pay the principle of 4 months ahead and the interest which counts up until the current date.
If the bond issuer has an intent to exercise such call options, a letter must be issued to notify the investors in prior. The call option is within the rights of the bond issuer under section 9 of the rights and responsibility of the bond issuer and bond holder.
Was this article helpful?
That’s Great!
Thank you for your feedback
Sorry! We couldn't be helpful
Thank you for your feedback
Feedback sent
We appreciate your effort and will try to fix the article