Not to be confused with a chastity belt, of which Kenneth Cole is making very stylish models these days.
Chastity bonds are redeemed at par value if the company that issued the bond is targeted in a takeover. The takeover itself matures them. The idea here is the bonds will raise the cost of the takeover, and potentially shoo away the pursuing company.
Say Company Big Box is pursing Company Mom and Pop for a takeover. Mom and Pop is smaller, and looks like a cheap buy. Company Big Box sneaks around Mom and Pop management, and presents to the shareholders all the profit it can make them as a result of the purchase. The pressure is on Mom and Pop to sell, and provide the shareholders all the profit possible. But when Mom and Pop reveal that the chastity bonds it has issued will add a significant amount to the purchase, it increases the cost so much that Big Box loses interest in Mom and Pop.
