Buy back your bank debt

Author: | Published: 17 Nov 2008

Many US corporate issuers have seen the price of their bank debt fall sharply in recent months and now find their bank debt trading at significantly below par. Under the terms of most loan agreements, borrowers are barred from retiring or purchasing such bank debt at a discount. That position may be changing, based on recent market developments that allow borrowers to reap the benefit of discounted pricing.

A number of borrowers, including RH Donnelley and Manor Care, have successfully negotiated amendments to their loan agreements in recent months to permit them to retire significant amounts of their bank debt at below par, often utilising reverse Dutch auctions. Such amendments can be styled to permit one-time repurchases or permit a series of repurchases to be conducted over a period of time, subject to an agreed minimum repayment amount per purchase. Amendments of this nature...