Adjustment Bond
Barron's Finance & Investment Dictionary:
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Adjustment Bond
bond issued in exchange for outstanding bonds when recapitalizing a corporation that faces bankruptcy. Authorization for the exchange comes from the bondholders, who consider adjustment bonds a lesser evil. These bonds promise to pay interest only to the extent earned by the corporation. This gives them one of the characteristics of income bonds, which trade flat—that is, without accrued interest.
| Adjusted Gross Income (AGI), Adjusted Exercise Price | |
| Adjustment Date, Administrator |
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Adjustment Bond
Investopedia Financial Dictionary:
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Adjustment Bond
Issued by a corporation during a restructuring phase, an adjustment bond is given to the bondholders of an outstanding bond issue prior to the restructuring. The debt obligation is consolidated and transferred from the outstanding bond issue to the adjustment bond. This is effectively a recapitalization of the company's outstanding debt obligations, which is accomplished by adjusting the terms (such as interest rates and lengths to maturity) to increase the likelihood that the company will be able to meet its obligations.
Investopedia Says:
If a company is near bankruptcy and requires protection from creditors (Chapter 11), it is likely unable to make payments on its debt obligations. If this is the case, the company will be liquidated and the value will be spread among its creditors. However, creditors will generally only receive a fraction of their original loans to the company. This is why creditors and the company will work together to recapitalize debt obligations so that the company is able to meet its obligations and continue operations, thus increasing the value that creditors will receive.
Related Links:
If a company files for bankruptcy, stockholders have the most to lose. Find out why. An Overview Of Corporate Bankruptcy
Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy. Corporate Bonds: An Introduction To Credit Risk
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Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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Reorganization Bond
(finance term)
Income Bond
(finance term)
Treasury Inflation Protection Bonds (TIPS)
(insurance term)