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In early 1977, four Bell System subsidiaries made tender offers for outstanding high-coupon bonds that were protected from call for two or three years, offers exceeding market prices of the bonds by about $30. Other companies continued another non-traditional refunding activity that became popular in the early 1970s, repurchasing low-coupon bonds selling at discounts. This practice has been marked by controversy, because the paper "gains" on such purchases are treated as profit on income statements. The major focus of this paper is examination of the implications of these non-traditional refunding techniques on shareholder wealth.
Financial Management © 1978 Financial Management Association International