Bonds Interest Rate

Why would a company call bonds if interest rates drop?

I sort of get the concept but tell me if I'm right. If bank interest rates drop, the prices of bonds will go up. So obviously a company would want to issue bonds that sell for more, but why would it call current bonds?

Public Comments

1. If interest rates drop, the company can issue new bonds with lower interest rates. They pay less interest expense on the new bonds.
2. they call them b/c like you said, borrowing is cheaper if rates drop. If you sell a bond with a 6% coupon, and then rates drop, your bond is at a premium meaning that the bond has increased in value, just as you had pointed out (which is great if you're the one handing out the dough to be lent). They call the bonds so they can reissue them at a lower coupon.