The Decision to Repurchase Debt

31 Pages Posted: 22 Mar 2009

See all articles by Tom Nohel

Tom Nohel

Loyola University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: March 18, 2009


We compile a diverse sample of 208 debt tender offers executed by 189 firms during the period 1989 - 1996. On average, tender offers are wealth-creating events, with cumulative equity announcement returns of 1.47%. Tender offers financed with equity fail to add value, but those financed with asset sales generate mean cumulative equity announcement returns of 3.77%. Compared to a matched sample of non-tendering firms, the firms that tender debt have less cash, greater long-term debt and more assets. Prior to the tender event, debt-tendering firms have lower operating returns than their peers; they also trade at a discount. After the tender offer, assets increase, operating returns improve and the tendering firms are awarded a market premium.

Keywords: debt tender, capital structure, covenants

JEL Classification: G32

Suggested Citation

Nohel, Tom, The Decision to Repurchase Debt (March 18, 2009). Available at SSRN: or

Tom Nohel (Contact Author)

Loyola University of Chicago ( email )

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