Hedge Fund Glossary

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Make-Whole

shorthand for a “make whole call” feature, which allows the Issuer of a series of Bonds to redeem those Bonds without the consent of the Bondholders at a “make whole price” that is the sum of the present values of each remaining payment on the Bonds (until maturity or until the date on which the Bonds otherwise become redeemable at a fixed price, if applicable). These present values are calculated using a discount rate equal to the Comparable Treasury rate plus a Spread (usually 50 Basis Points). The sum of the present values of the remaining payments on a High Yield Bond can often substantially exceed the principal amount of the High Yield Bond. A “make whole price” of 120 percent of principal amount is not unheard of in the context of a make whole redemption of a High Yield Bond. This feature is generally available to Issuers during the Non-Call Period or in a Change of Control context.

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