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Purchasing and Modifying Discount Debt — What Dealmakers Should Know

M&A Insights


In the current economy, a significant amount of outstanding corporate debt is currently valued at a considerable discount to its original valuation. Many investors and issuers are taking advantage of potentially attractive returns by purchasing devalued debt. 

Potential acquirors of discounted debt should be aware that purchasing, holding, and disposing of debt can have significant income tax consequences for both the issuer and the holder. Further, negotiated modification of debt instrument terms can have major income tax consequences to the issuer and the holder. 

Companies and their financial sponsors considering a discounted debt buyback or debt modification should be aware of potential tax consequences that could materially affect the expected economic benefit of a transaction. 

Purchasing and modifying discount debt — What dealmakers should know

This latest M&A insights article provides insight into this complicated process, including: 

  • The purchasing, holding and disposing of debt and tax consequences resulting from the modification of debt instrument terms
  • Potential risks associated when considering a discounted debt buyback

Learn more about purchase of discounted debts by downloading and reading the attachment, above. 

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