Debt Tender Offer


DEFINITION of 'Debt Tender Offer'

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.

  1. Short Tender

    An investing practice that involves using borrowed stock to respond ...
  2. Mini-Tender

    A type of third-party offer made to a company's shareholders ...
  3. Offering

    The issue or sale of a security by a company. It is often used ...
  4. Tender

    To invite bids for a project, or to accept a formal offer such ...
  5. Tender Offer

    An offer to purchase some or all of shareholders' shares in a ...
  6. Buyback

    The repurchase of outstanding shares (repurchase) by a company ...
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