Debt Tender Offer

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Tender

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

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

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

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

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

    A type of third-party offer made to a company's shareholders ...
Related Articles
  1. Cashing In On Corporate Restructuring
    Bonds & Fixed Income

    Cashing In On Corporate Restructuring

  2. If I reject the tender offer for acquisition ...
    Investing

    If I reject the tender offer for acquisition ...

  3. Projected Returns: Honing The Craft
    Retirement

    Projected Returns: Honing The Craft

  4. Top 10 Tips For A Financially Safe Retirement
    Savings

    Top 10 Tips For A Financially Safe Retirement

comments powered by Disqus
Hot Definitions
  1. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
  6. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that ...
Trading Center