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| Author: | Brick, I. Palmon, O. |
| Title: | The tax advantages of refunding debt by calling, repurchasing, and putting |
| Journal: | Financial Management
1993 : WINTER, VOL. 22:4, p. 96-105 |
| Index terms: | DEBT PUT OPTIONS BONDS |
| Language: | eng |
| Abstract: | The authors analyze the tax benefits of three alternative refunding mechanisms which facilitate debt retirement should the bond's yield decline. First, firms may issue callable debt. Second, unless prohibited by a specific indenture provision, firms may repurchase their outstanding bonds in the open market. Third, the authors propose an innovative bond contract which facilitates an alternative refunding policy. This proposed bond contract gives each bondholder a put option with an exercise price that is indexed to the interest rate. |
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