Debt Tender Offer

What is a 'Debt Tender Offer'

A debt tender offer is when a firm retires all or a portion of its debt securities by making an offer to its debtholders to repurchase a predetermined number of bonds at a specified price and during a set period of time. Firms may use a debt tender offer as a mechanism for capital restructuring or refinancing.

BREAKING DOWN 'Debt Tender Offer'

For example, a firm may have issued bonds during a time when interest rates were high. If interest rates have come down significantly, the firm may want to conduct a new bond offering at a lower rate and then use the proceeds to conduct a debt tender offering in order to buy back the more expensive bonds as a way of cutting costs.

Furthermore, a highly leveraged firm may also wish to use its retained earnings to buy back bonds in order lower its debt-to-equity ratio. Doing so will give the company a greater margin of safety against bankruptcy because the company will be paying less interest.

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RELATED FAQS
  1. What happens to the shares of stock purchased in a tender offer?

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  2. Why would it be in the interest of shareholders to accept a tender offer?

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  4. What usually happens to the price of a stock when a tender offer for shares of the ...

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  5. If a company offers a buyback of its shares, how do I decide whether to accept the ...

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  6. If I reject the tender offer for acquisition of the stock that I own in a company ...

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