So the February 2015 assumption of $2.2B new debt may have been to allow early retirement of outstanding (higher interest rate) debt? Is this normal financial management? Or the smell of smoke? I try to avoid using one credit card to pay off another.
Lilly Announces Cash Tender Offer for Up to $1.6 Billion Aggregate Principal Amount of Its Outstanding Debt Securities and the Redemption of Its 6.57% Notes due 2016
DEFINITION of 'Debt Tender Offer'
When a firm retires all or a portion of its debt securities by making an offer to its debtholders to repurchase a predetermined number of bonds at a specified price and during a set period of time. Firms may use a debt tender offer as a mechanism for capital restructuring or refinancing.
INVESTOPEDIA EXPLAINS 'Debt Tender Offer'
For example, a firm may have issued bonds during a time when interest rates were high. If interest rates have come down significantly, the firm may want to conduct a new bond offering at a lower rate and then use the proceeds to conduct a debt tender offering in order to buy back the more expensive bonds as a way of cutting costs.
Furthermore, a highly leveraged firm may also wish to use its retained earnings to buy back bonds in order lower its debt-to-equity ratio. Doing so will give the company a greater margin of safety against bankruptcy because the company will be paying less interest.
Lilly Announces Cash Tender Offer for Up to $1.6 Billion Aggregate Principal Amount of Its Outstanding Debt Securities and the Redemption of Its 6.57% Notes due 2016
DEFINITION of 'Debt Tender Offer'
When a firm retires all or a portion of its debt securities by making an offer to its debtholders to repurchase a predetermined number of bonds at a specified price and during a set period of time. Firms may use a debt tender offer as a mechanism for capital restructuring or refinancing.
INVESTOPEDIA EXPLAINS 'Debt Tender Offer'
For example, a firm may have issued bonds during a time when interest rates were high. If interest rates have come down significantly, the firm may want to conduct a new bond offering at a lower rate and then use the proceeds to conduct a debt tender offering in order to buy back the more expensive bonds as a way of cutting costs.
Furthermore, a highly leveraged firm may also wish to use its retained earnings to buy back bonds in order lower its debt-to-equity ratio. Doing so will give the company a greater margin of safety against bankruptcy because the company will be paying less interest.