adjustment bond

Definition

A type of bond issued during a company's recapitalization that exchanges outstanding bonds for a newly issued bond. Adjustment bonds are created with the permission of bondholders, who often approve of their issuance because exchanging bonds for new debt is better than the alternative: bankruptcy. An adjustment bond is similar to an income bond in that it pays out interest only when the company has earnings, with no accrued interest and no default in the case that interest is not paid in a particular period.
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adjustment adjustment bureau