Simple English definitions for legal terms
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Bond retirement: When a company or government cancels a bond that has been paid off or called back, it is called bond retirement. This means that the bond is no longer valid and the borrower no longer owes any money to the bondholder. It's like when you pay off a loan and the bank cancels the debt, except with bonds, it's a little more formal.
Bond Retirement
Bond retirement refers to the cancellation of a bond that has been called or paid.
When a bond is issued, it has a maturity date, which is the date when the issuer is required to pay back the principal amount to the bondholders. However, sometimes the issuer may decide to retire the bond before its maturity date. This can happen if the issuer has enough funds to pay off the bond early or if the bond has a call provision that allows the issuer to redeem the bond before maturity. When a bond is retired, it means that the issuer has cancelled the bond and is no longer obligated to make any further payments to the bondholders.
Example 1: Company A issued a bond with a maturity date of 10 years. However, after 5 years, the company decided to retire the bond early. The company paid off the bondholders and cancelled the bond.
Example 2: Company B issued a bond with a call provision that allowed the company to redeem the bond after 3 years. After 3 years, the company decided to exercise the call option and retire the bond. The bondholders received their principal amount and the bond was cancelled.
Both examples illustrate bond retirement, where the issuer cancels the bond and pays off the bondholders. In example 1, the bond was retired before its maturity date, while in example 2, the bond was retired due to the call provision. In both cases, the bondholders received their principal amount and the bond was cancelled, meaning that the issuer was no longer obligated to make any further payments.