Evonik Issues Green Bonds with Predictable Payments
Evonik Industries AG has recently issued green subordinated resettable fixed rate notes, set to mature on September 9, 2025. These notes are a type of fully amortized bond, offering clarity and predictability for investors. Fully amortized bonds, like Evonik's issuance, have a specific maturity date. They require regular payments that consist of both principal and interest components. Over time, the principal portion increases, while the interest portion decreases. Each payment reduces the bond's principal balance, minimizing risk. This predictable cash flow pattern makes fully amortized bonds popular among investors seeking stability. The fixed periodic payment for these bonds is calculated using financial tools like a PMT function. The interest component of each payment is based on the remaining principal balance. The principal repayment for each year is then calculated by subtracting the interest payment from the fixed periodic payment. With a fixed payment schedule, budgeting and financial planning become simpler. At maturity, the entire principal balance of a fully amortized bond, such as Evonik's notes, is repaid. This provides a clear endpoint for both the investor and the issuer. The predictable cash flows and fixed payment schedule make fully amortized bonds an attractive option for investors.
