I was too lazy to find a better forum and sign up, and figured there are more than enough bankers here anyways. Let's say Company A has a $100MM bond outstanding and wants to redeem it at makewhole. The redemption premium is $10MM (i.e. they have to pay $110MM to take the bonds out). Concurrent with the redemption, Company A will issue a $110MM bond (so they are funding the redemption with a new issue) maturing in, say, 5 years. My question is, on a PV basis, do I recognize a cost of $10MM or a cost of $10MM discounted back from the new bond's maturity date to today? The latter is obviously more favourable and seems theoretically correct, but I want to double check. My argument for the latter is that the company only has to actually pay that $10MM down out of pocket in 5 years time - in the meanwhile, they're funding it with a new bond (with the negative effect being an incrementally higher debt load and higher interest payments). From the no-arbitrage perspective, they can effectively sock away $6MM today to repay that $10MM in 5 years' time. Thoughts?