Mark Vacha discusses municipal bond tender offers in The Ledger, a quarterly newsletter by the Government Finance Officers Association of Pennsylvania. Municipal bond tender offers have gained traction as an alternative to tax-exempt advance refundings, especially since those were largely curtailed after 2017. These offers allow issuers to repurchase outstanding bonds – often non-callable or uneconomical to refund – using either available funds or proceeds from new bond issues. Tender offers can help achieve goals similar to traditional refundings, such as cost savings, covenant relief, or preparing for asset sales. Depending on market conditions and issuer preferences, other strategies like forward delivery refundings, taxable advance refundings, or cash defeasance may also be considered.

Legally, issuers must ensure they have authority under state law and relevant bond documents to conduct a tender offer, and they must comply with federal tax and securities regulations. The process typically spans three to four weeks and involves key documents like the preliminary official statement, the invitation to tender, and the dealer manager agreement. While municipal tenders are not subject to the same strict timing rules as corporate tenders, they are generally held open for about two weeks to ensure fair dealing. As issuers and investors become more familiar with the benefits and mechanics of tender offers, their use in the municipal market is expected to grow, potentially extending beyond the largest issuers.

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