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Callable Step-Up Note
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A callable debt issue that features one or more increases in a fixed rate or a step- up in a spread over LIBOR during the life of the note. Most issuers of these notes have low credit ratings. Consequently, the purpose of the step up is usually to encourage the issuer to refinance. If the issuer does not refinance, the higher rate is designed to be compensation for the investor's acceptance of credit risk. Occasionally a highly-rated issuer will sell one of these bonds to implement a strongly held view that rates will decline and a replacement bond can be issued at a lower rate. Also called Step-Up Coupon Note, Step-Up Bond, Increasing Rate Notes (IRNs). Compare with Convertible Reset Debenture. See also Multi-Step-Up Callable Bond or Note.
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