An entity issued a five-year bond that is listed and traded on a stock exchange. In the following year, the entity proposes a modification of the bond’s repayment terms, to extend the maturity. The proposed modification becomes effective if it achieves approval of more than 75 per cent of the bondholders, in accordance with the terms set out in the offering circular. Dissenting bondholders are entitled to have their bonds purchased by the entity (or any other party) at fair value, being the market price immediately prior to the proposed modification being put to the bondholders for consideration. The entity appoints an investment bank to stand ready to acquire any bonds from the dissenting bondholders and the bank will hold the bonds afterwards as principal. The proposed: modification of the repayment terms was accepted by 80 per cent of the bondholders. The dissenting 20 per cent sold their bonds to an investment bank at fair value.

Would you consider this situation as an extinguishment or modification of a debt instrument?