Buying back corporate bonds : the local perspective

Abstract

'An increasing number of US companies are doing buy-backs because the economics of such a move have probably never been better.' Against a backdrop of economic turmoil, bond buybacks have become more actively practiced, amongst governments as well as body corporates as a means of debt restructuring or otherwise. Although a financial crisis significantly increases the likelihood of a bond buyback taking place, numerous other factors also play a part. Bond buybacks have been taking place for a while now, but only started happening in Malta quite recently, circa 10 years ago. With the buying back of bonds picking up pace, the main purpose of carrying out this thesis, was to provide a comprehensive study of the various aspects associated with a bond buyback. Focused semi-structured interviews with various key personnel such as bond issuers, regulators, financial advisors, brokers and legal practitioners was considered to be the most appropriate method of collecting primary data relating to the exercise, with prime focus on how and why bonds were bought back. Issuers who did not repurchase bonds were also asked whether they would consider buying back in the future. A complete technical analysis of bond buybacks was carried out through a comprehensive financial statements review (of all listed corporate bond issuers) together with any available trading data on the Malta Stock Exchange website, company announcements also proved important in providing key information. Finally a review of relevant material available in books, articles, journals and websites was made in order to obtain a holistic overview of what a bond buyback may encompass both locally and internationally. All in all, the study attempts to give a complete and encompassing overview of the relevant topics associated with bond buybacks, be it legal, regulatory, accounting, fiscal or technical.