Spens clause and Statement of recommended practice: Difference between pages

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(Link with Redemption page.)
 
imported>Doug Williamson
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A potentially strong form of protection for lenders/investors in securities, designed to mitigate the adverse effects of call risk for investors.
(SORP).  


Under a Spens clause the borrower/issuer has to value the cash flows beyond the date of the call/redemption at the government bond yield, or some other low rate.
Recommendations for accounting practices for specialised industries or sectors issued by industry or sectoral bodies recognised by the UK Accounting Standards Board for this purpose.


This potentially makes it prohibitively expensive for the issuer to take an early redemption.
For example the Bank of England's purchase scheme for corporate bonds favours bonds having a Spens clause.
The consequence of a Spens clause for the investor is that they can re-invest the redemption monies in government stock, thus preserving their originally expected cash inflows at lower risk.


== See also ==
* [[Accounting standards]]
* [[Accounting Standards Board]]
* [[Exposure Draft]]


== See also ==
[[Category:Accounting_and_Reporting]]
* [[Call protection]]
* [[Call risk]]
* [[Loan agreement]]
* [[Make whole clause]]
* [[MCT]]
* [[Redemption]]

Revision as of 10:41, 9 October 2013

(SORP).

Recommendations for accounting practices for specialised industries or sectors issued by industry or sectoral bodies recognised by the UK Accounting Standards Board for this purpose.


See also

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