sinking fund provision

sinking fund provision definition - business

sinking fund provision

A stipulation in many bond indentures that the borrower retire a certain proportion of the debt annually. The retirement may be effected by calling the bonds from the investors (if interest rates have declined) or by purchasing the bonds in the open market (if interest rates have increased). Also called bond sinking fund. Compare doubling option. See also funnel sinking fund.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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