Davis Polk partner Marcel Fausten was quoted in Bloomberg discussing high-yield bond tenders.

“If you were not worried about doing something quickly as trading levels go down, you could buy back bonds in the open market — the tender is replicating that,” said Marcel. “In this rate environment, depending on the terms of the bond, some companies find themselves in a position where the premium to trading levels is below the call price.”

From a corporate treasurer’s perspective, the move to tender the bonds at market prices rather than pay a premium makes sense, he said. “Everyone is expected to act in an economically rational way, on the issuer side it’s the fiduciary duty to shareholders. Paying more than you have to pay to manage the capital structure is not in the company’s best interest.”

Emboldened Junk Borrowers ‘Shave Pennies’ With Tenders on Cheap,” Bloomberg (February 29, 2024) (subscription required)