Mandatory Redemption Schedule

The good news is that our sconce manufacturing business is growing. After all, everybody loves a good sconce. The bad news is that we’ve outgrown our facility and need to build a new one. We’ve decided to issue bonds to finance the project, because we know we’ll be able to pay those bonds back no problem once our sconce production capacity increases.

Issuing bonds isn’t an unusual way for an organization to increase funds. Sometimes those bonds come with a “mandatory redemption schedule,” which means we have to redeem the bonds (either the whole amount or just a portion) at specified time intervals prior to their maturity date. Bond indenture agreements don’t always come with a mandatory redemption provision—sometimes redemption is optional—so before we issue or buy bonds, we should definitely take the time to figure out how and when they’ll be redeemed.