The life cycle of make-whole call provisions

Perception of industry professionals is that these bonds behave no differently than non-callable bonds. However, make-whole callable bonds are almost twice as likely to be retired early as non-callable bonds. Analysis of which bonds/firms include make-whole call provisions as well as of retirement events suggests the call provision aids firms in precautionary refinancing and in paving the way for major corporate events like M&A. Detailed analysis of news reports reveals three motivating rationales: 1) to refund the debt at low current interest rates, 2) as a result of a merger or acquisition, 3) as a mechanism for paying out excess cash.