Equity clawbacks

Equity clawbacks allow the issuer to refinance a certain amount of the outstanding bonds with proceeds from an equity offering, whether initial or follow-on offerings. A typical clawback would be for up to 35% of the outstanding bond issue at a level equal to par, plus the coupon. An example: Company A raises money via an IPO and exercises a clawback for a portion of its 10% bonds at a repurchase price of 110% of par. This is an optional redemption for the issuer and, while the investor has no say or obligation, the repayment premium is tough to disregard.