Contingent Payments and Debt Contracts

Volume 22 Number 2

Financial Management, 1993, vol. 22, issue 2

Abstract: The phrase "corporate debt" usually conjures up the picture of a security that promises periodic fixed-coupon payments and a larger face value payment at maturity. Potentially, however, the stream of periodic payments over the life of a debt security can be structured several ways. For example, in addition to fixed periodic coupon payments as with standard fixed-coupon bonds, periodic payments can be made contingent on the accounting earnings of the issuing corporation in each period as with income bonds, or there call be only one payment at maturity as with zero-coupon bonds. Debt securities with all of the above three payment structures have been issued; however, in practice, most corporate debt carries it fixed coupon.

Date: 1993
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