Make whole clause
A strong form of protection for lenders/investors in securities, designed to mitigate the adverse effects of call risk for investors.
Under a make whole clause the borrower/issuer has to value the cash flows beyond the date of the early call/redemption at the government bond yield.
This potentially makes it prohibitively expensive for the issuer to take an early redemption.
The consequence of a make whole 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.
Make whole clauses are similar in their effect to Spens clauses.
Sometimes known as a make whole provision.