Module III· DCM — Investment Grade & Senior DebtIntermediate
Question
What is a make-whole call provision, and why does it exist?
Answer
A make-whole call lets the issuer redeem a bond before maturity by paying investors the present value of remaining coupons and principal discounted at a reference rate plus spread. It protects investors from reinvestment loss and makes early redemption expensive unless rates or strategic needs justify it. It is common in investment-grade bonds.