income bond

n.
A long-term debt security in which the issuer is required to pay interest only when interest is earned.

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.

Investopedia Says:

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.

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Bond on which the payment of interest is required only when earnings are available. Typically, interest that is bypassed does not accumulate. Income bonds are commonly used during the reorganization of a failing or failed business firm.