Series 52: 2.7.3. Repurchase

2.7.3.  Repurchase

If an issuer is unable to call a bond, it may be able to simply buy it back from the bondholder. Bond repurchases come in two basic types. Tender options allow the investor an opportunity to “tender” or sell the bond to the issuer within a period of time specified by the issuer and at a specified price. The investor must choose between keeping or selling the bond. An open market purchase may occur at any time the issuer chooses at a price negotiated by the parties.

A tender option bond, sometimes referred to as an optional tender, is a bond that provides the bondholder with the right to surrender the bonds to the issuer at a predetermined price (usually par). The dates within which the bond is tendered are exclusively designated by the issuer. Tender option bonds are typically issued when outstanding bonds are ineligible for an advance refunding, either because they