Income bond

Income Bond

A type of debt security in which only the face value of the bond is promised to be paid to the investor, with any coupon payments being paid only if the issuing company has enough earnings to pay for the coupon payment.

Investopedia Commentary

The income bond is a somewhat rare financial instrument which generally serves a corporate purpose similar to that of preferred shares. It may be structured so that unpaid interest payments accumulate and become due upon maturity of the bond issue, but this is usually not the case as such, it can be a useful tool to help a corporation avoid bankruptcy during times of poor financial health or ongoing reorganization.

Related Links

Asset Allocation within Fixed Income
An Overview Of Corporate Bankruptcy
Advanced Bond Concepts

See also: Bankruptcy, Bond, Coupon, Maturity, Maturity Date, Reorganization

income bond

A long-term debt security in which the issuer is required to pay interest only when interest is earned. This rare security, issued principally as part of a corporate reorganization, offers an investor a relatively weak promise of payment. Some issues require that unpaid interest be accumulated and made up in periods that earnings permit. Also called adjustment bond.