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Who benefits from bond tender offers in Europe?

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  • de Jong, Abe
  • Roosenboom, Peter
  • Schramade, Willem

Abstract

This paper investigates the wealth effects of European cash tender offers for bonds during the period from 1996 to 2005. European bond offers are made to refinance (35% of cases), to reduce debt (40%) or triggered by an ownership change (25%). We investigate the wealth effects to both bondholders and shareholders. Cash tender offers for bonds turn out to be value creating for firms; with bondholders taking most of the gains on a relative basis. We find no evidence of wealth transfers from shareholders to bondholders: bondholders are paid an average tender premium of 3.9% but shareholders do not experience a significant wealth loss. Shareholders even benefit from making refinancing bond tender offers after a drop in interest rates. The wealth effects to both bondholders and shareholders increase in the remaining time to maturity. This suggests that tendering the bonds, rather than waiting for them to mature, is a win-win situation for both types of security holders.

Suggested Citation

  • de Jong, Abe & Roosenboom, Peter & Schramade, Willem, 2009. "Who benefits from bond tender offers in Europe?," Journal of Multinational Financial Management, Elsevier, vol. 19(5), pages 355-369, December.
    • Handle: RePEc:eee:mulfin:v:19:y:2009:i:5:p:355-369
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    1. Flavio Bazzana & Luigi Mittone & Luciano Andreozzi, 2015. "The Freeze-out Bond Exchange Offer: An Experimental Approach," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 16(2), pages 150-162, April.
    2. Jamie A. Anderson-Parson & Terrill R. Keasler & Robin T. Byerly, 2015. "Bond Indenture Consent Solicitations as a Debt Management Tool," IJFS, MDPI, vol. 3(3), pages 1-14, July.
    3. Lubberink, Martien, 2014. "Are banks’ below-par own debt repurchases a cause for prudential concern?," MPRA Paper 59475, University Library of Munich, Germany.
    4. repec:mul:jdp901:doi:10.12831/73633:y:2013:i:1:p:51-65 is not listed on IDEAS
    5. Brown, Scott & Powers, Eric, 2020. "The life cycle of make-whole call provisions," Journal of Corporate Finance, Elsevier, vol. 65(C).
    6. Flavio Bazzana & Eleonora Broccardo, 2013. "The role of bondholder coordination in freeze-out exchange offers," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, issue 1, pages 67-84, January.

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