Conditional Call Option

If you, the bond issuer, do call this bond...early...then you have to provide another bond that is not callable until the original terms of calling back that bond to its mothership are met.

Call risk is the key notion at issue here. A bond can yield 7 percent when it's issued, but then over time, for whatever reason, prevailing rates go down and the bonds value goes up, giving it a lower yield...and the company wants to buy it back or call it. It can then replace that expensive debt with cheaper debt. So like...why wouldn't they?

Well, a conditional call option takes away the call risk, so that investors can rest easy on their fat yields until the original terms of the bond, when it was issued, are met.