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What Is Bond Action?

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  • Written By: Geri Terzo
  • Edited By: PJP Schroeder
  • Last Modified Date: 15 July 2014
  • Copyright Protected:
    2003-2014
    Conjecture Corporation
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When an entity issues debt in the capital markets to raise money, those bond securities are purchased by investors. The issuer, whether it be a government or a corporation, becomes indebted to the investors and must make ongoing interest payments to these lenders. The bond has a expiration date, at which time the issuer must repay the face value of the debt security as well. In the event there is some violation on the part of the issuer relating to the details of the contract with investors, lenders may respond with a bond action to collect any money that is believed to be owed.

A bond action may involve litigation. Class action lawsuits could be brought against a bond issuer if a group of investors experience some deviation in the expectation for the investment based on the agreement. It is possible for a bond action to begin if investors feel that an issuer misrepresented or left out relevant information from a debt investment opportunity. If the risks were not properly disclosed, this might also be grounds for litigation. The precise amount of financial damage that might be alleged may be difficult to ascertain given the unpredictable nature of the financial markets.

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Employees are able to take advantage of various savings mechanisms that employers offer. It is possible to pursue a bond action as an employee and to direct an employer to deduct a certain percentage of a paycheck to be invested in a savings bond. The process may involve filling out a bond action application and submitting the form with the personnel department. Employees can select the types of bonds to invest in based on any parameters established by an employer. It may also be possible to name a beneficiary in the event that the investor becomes deceased.

Quite possibly, a bond action refers to the restructuring or reorganization of debts. The catalyst for doing so may be a change in the interest rate environment. Bonds can be refinanced.

For instance, a bond issuer, such as a municipality or a corporation, may be able to save money by refinancing bonds when the interest goes lower. Given that a bond issuer must pay bond holders interest payments for the duration of the contract, assigning lower interest rates to those payments becomes beneficial. The money saved from the refinancing can be quantified because the duration of bond contracts is known and the money saved can be directed in another fashion.

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