Question

A currently callable bond has a non-refundable provision written into the indenture; explain how this impacts the company’s ability to call the bond, if at all.

Answer 1

Callable bond is a type of bond that can be recalled or retired by the company (lets say if interest rates decline, its in the interest of the firm to retire high cost funding sources and go for low cost sources)

A non-refundable provision means that the firm can't call back the bond for a certain time frame and also that it can't be retired from the proceeds generated through issuance of new low cost bonds. However, it can be called through funds generated from internal / organic sources.