Buy- back bonds: what it is and why it is like to banks and investors?
Recently, bondholders Mediobanca have received a letter that informs on the beginning of a voluntary offer to repurchase its bonds maturing in the period 2014-2015. No one is obliged to do so, you can also choose to bring the signed bond until maturity, however, the opportunity exists.
This is a typical operation of a buy-back or repurchase of the bonds issued in previous years, as there are more and more widespread trends in the bond market. The reason for this trend is to be found in the changed market conditions after the crisis: the conditions imposed with respect to securities issued 3 or 4 years ago are often difficult to sustain. Here is part of the liability management , ie the liability management in banks, these buy- back – which in recent times were very frequent and profitable for lenders.
In fact, the repurchase of financial liabilities allows you to achieve the pre-tax profits and buy back their bonds below par, often eliminating those from circulation and replacing them with other too onerous emissions characterized by the most favorable conditions for the bank. But it is not only the one who buys to make the deal , it is also the seller , or the small investor can sell the bonds at a lower price than the current high market – an opportunity not to be missed for those who need instant cash.