Bond Tender Offer: How It Works, What Refusing Costs, and FedEx's 2026 Offer
Michael Whitman
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Trading since 2017, full-time since 2020
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YouTube creator, 137K subscribers
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Published 2026-09-14
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Updated
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Reviewed
Bond tender offer is a public invitation by an issuer to repurchase some or all of an outstanding bond before maturity, usually at a stated price above the market. Holders choose whether to accept, and the terms often include changes to the bond's covenants that bind those who decline.
A bond tender offer is an issuer’s public offer to buy back some or all of one of its bonds for cash before maturity, at a stated price, within a stated window. You can sell or keep your bonds, but the offer can still change what you own if you keep them.
The holder’s question is never only “is the price fair?” It is also how much of my position will actually be bought, what happens to the bonds left behind, and what deadline decides the price. A real 2026 offer from FedEx answers all three with numbers, so this page walks through it.
How it works
The issuer publishes an offer to purchase, usually through a press release filed with the SEC and a longer offer document sent through brokers. It names the bonds, the price or the price formula, the deadlines and any limit on how much it will buy.
Most corporate offers pay two prices. Holders who tender by the early deadline get the total consideration; anyone who tenders later gets the total minus an early tender premium, quoted per $1,000 of face value. The premium exists to pull acceptances forward.
The price is often a formula, not a number. Offers on investment-grade bonds commonly use a fixed spread: on pricing day the bond’s remaining coupons and principal are discounted at a named Treasury yield plus a set number of basis points. The holder only learns the dollar price a day or so after the early deadline.
Each holder decides alone. Some tender, some do not, and the issuer buys what comes in up to its cap, following any order of priority the offer set out.
Why not just call the bond
Many bonds cannot be called yet, or at all. A callable bond gives the issuer a right to redeem at a set price from a set date. Where that right does not exist, or costs more than the issuer wants to pay, the only way to retire debt early is to buy it from willing sellers.
That reverses the usual balance. For once the issuer needs something from you, and the price and early premium are what it pays to get it.
A worked example: FedEx, June and July 2026
The offer. On 25 June 2026 FedEx offered to buy notes from 19 series with $14.4 billion outstanding, spending no more than $4.15 billion before accrued interest. Each series carried a $30 early tender premium per $1,000, an early deadline of 5 p.m. New York time on 9 July and a fixed spread over a Treasury yield. FedEx said the offers support cutting debt after the FedEx Freight spin-off, paid for with the dividend from FedEx Freight plus cash on hand.
The order of priority mattered most. Each series had an acceptance priority level from 1 to 19. FedEx would fill level 1 first, then level 2, and so on until the money ran out.
The response. By the early deadline holders had tendered $6,952,595,000, or 48.28% of everything outstanding. Series ranged from 34.92% tendered (the 5.250% notes due 2050) to 61.83% (the 4.400% notes due 2047).
The prices. On 10 July FedEx set the total consideration per $1,000 for the series it would buy, from $755.32 for the 4.500% notes due 2065 to $936.72 for the 5.100% notes due 2044. The 2065 price came from a 5.070% Treasury yield plus 110 basis points; discounting a 4.500% coupon and the principal at 6.17% for about 39 years gives about $755 per $1,000, the same figure within a dollar.
The outcome. FedEx accepted all early-tendered notes in levels 1 to 12, about 41.3% of the 5.100% notes due 2044 at level 13, and none from levels 14 to 19.
Holders had tendered $4.72 billion in levels 1 to 12, $326.0 million at level 13 and $1.90 billion in levels 14 to 19. FedEx bought $4,857,412,000 of face value, 69.86% of what was tendered. Multiplying each series’ accepted amount by its price gives $4,149,999,436, just under the cap, and about $707 million less than the face value retired.
| Holder tendered $100,000 face, early | Bought | Cash before interest | Handed back |
|---|---|---|---|
| 4.500% notes due 2065 (level 1) | all | $75,532 | $0 |
| 5.100% notes due 2044 (level 13) | about $41,253 | about $38,643 | about $58,747 |
| 3.100% notes due 2029 (level 14) | none | $0 | $100,000 |
Three holders made the same decision and got three results. The level-1 holder sold everything at about three-quarters of face value, the level-13 holder sold about two-fifths, and the level-14 holder sold nothing. Proration is applied in whole bond denominations, so a real account’s numbers would be rounded slightly. (FedEx press releases of 25 June and 10 July 2026, filed with the SEC and read on 1 November 2026.)
The consent solicitation
Many tender offers carry a request to amend the bond’s terms. Tendering also casts your vote for the amendments, which usually remove covenants that limit the issuer’s borrowing, asset sales or dividends.
If enough holders consent, the changes bind everyone, including the holders who said no. Warner Bros. Discovery’s subsidiaries launched offers and consent solicitations for substantially all of their notes on 9 June 2025 and had the consents needed to amend every indenture by 5 p.m. on 13 June. On WarnerMedia Holdings' 3.755% notes due 2027, $3,780,983,000 of $4,000,000,000 had been tendered by then, 94.5%.
So refusing is not neutral. The holder who declines keeps a bond in a smaller issue with weaker protections. Everything about that is legal and disclosed in the offer document.
Caps, proration and a smaller issue
A cap can be a dollar amount or a face amount, for the whole offer or per series. FedEx used a total purchase price cap with priority levels; Sensata Technologies used a $350 million cap in October 2025.
Sensata’s holders were scaled back in proportion. Holders tendered $874,135,000 of its $1 billion of 4.000% notes due 2029 by the early deadline, 87.4%, for $988.75 per $1,000 including a $50 early premium. Sensata expected to accept about $353,976,000 and prorated at about 38.2%, leaving $646,024,000 of the notes outstanding, the amount it listed when it launched a second tender for them in May 2026.
A shrunken issue trades less. With fewer bonds and fewer holders, dealers quote wider prices, which is part of what the bond market charges for selling a small leftover issue later.
The original data
We counted the companies making these offers. SEC EDGAR’s full-text search finds every 8-K document, exhibits included, that uses the phrase “early tender premium”. Each company counts once a year. To compare 2026 fairly, the chart uses the same window, 1 January to 31 October, for every year from 2015. From 2015 to 2026 those counts were 17, 38, 30, 26, 36, 52, 46, 22, 16, 32, 34 and 30.
2026 is an ordinary year so far. 30 companies through October, against 34 in the same months of 2025, 32 in 2024 and 16 in 2023, the low point. The peak was 2020 with 52, then 2021 with 46, the two years when the 10-year Treasury yield averaged 0.89% and 1.45%. Full calendar years run from 19 companies in 2015 to 59 in 2020, with 40 in each of 2024 and 2025 even as yields averaged above 4%, so cheap borrowing is one reason for these offers, not the only one.
Consent requests come and go. Of the 30 companies in 2026, 7 had an 8-K naming a consent solicitation alongside the early premium; in full-year 2023 it was 2 of 26.
The same names come back. 285 different companies account for the 451 company-years from 2015 to October 2026, and 39 of them appear in three or more years. Lumen Technologies appears in 8, Iron Mountain and EQT in 7 each.
Manufacturers lead. By the SEC industry code on the filing, 151 of the 451 company-years (33.48%) were manufacturers, 84 (18.63%) mining, construction or agriculture, 67 (14.86%) transport, communications and utilities, 60 (13.30%) finance and real estate, 47 (10.42%) services and 42 (9.31%) wholesale and retail. The counts cover only companies that file 8-K reports, and every row is in the tender offer data file; the earlier 2015 to 2025 file matches it year for year.
What the timing usually signals
Ahead of a refinancing. An issuer that can borrow more cheaply retires the expensive debt first. Falling interest rates are the classic trigger, and the fixed-spread price moves with the yield curve and the bond’s yield to maturity until pricing day.
After a corporate event. FedEx’s stated aim was to keep its debt in line after a spin-off. Covenants can also stand in the way of an acquisition, and a consent solicitation is the cheapest route around them.
When the debt trades far below par. Buying bonds back below face value lowers the amount owed, cuts the debt-to-equity ratio and books a gain that adds to shareholders’ equity. For an issuer in trouble, the holder’s real comparison is what they would recover in a default, the credit risk the market is already pricing.
When it fails
Declining on price alone. A holder decides the premium is too small and keeps the bond. The offer succeeds anyway, covenants are stripped by the consenting majority, and the holder owns a thinly traded bond with weaker protections than the one they bought.
Assuming a tender means a sale. The FedEx level-14 holder tendered on time and sold nothing.
Ignoring the consent solicitation, which is usually the half of the document with lasting effect.
Missing the early deadline. It was worth $30 per $1,000 at FedEx and $50 at Sensata, and once FedEx’s cap was used up by early tenders, the offer as it stood had no money left for later ones.
Forgetting tax. Accepting is a sale, so a holder who bought below the tender price may owe capital gains tax that holding to maturity would have deferred.
The question: Tendered at 101 or hold for 100?
Not on price alone. Check how much will actually be bought, what the consent changes, and how small the issue will be afterward. Selling a leftover position later calls for a limit order rather than a market order, because a rarely traded bond can be quoted far from its value.
Questions people ask
Should I accept a bond tender offer?
That depends on your price view, the consent terms and the cap. Read the offer document for the priority level, proration rule and amendments, not only the price; FedEx bought 69.86% of what was tendered early.
What happens if I don’t tender my bonds?
You keep them and keep getting interest, but the issue may be smaller and, if a consent passed, its covenants weaker. At Warner Bros. Discovery 94.5% of one series was tendered within days.
Is a tender offer price above the market price?
Usually, because holders must be paid to sell, but it can still be below face value. FedEx paid from $755.32 to $936.72 per $1,000 in July 2026 for bonds with coupons below current yields.
What is an early tender premium?
An extra amount, quoted per $1,000 of face value, paid only to holders who tender by the early deadline. It was $30 per $1,000 in FedEx’s 2026 offer.
Related
Callable bond covers the version where the issuer needs no agreement. Corporate bond covers the covenants a consent solicitation removes. And bond market covers why a shrunken issue costs more to trade.
The interesting part of a tender offer is never the price. It is the consent solicitation attached to it — the part that strips protections from the bonds of everybody who says no, and which is disclosed properly and read by almost nobody.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.