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>They return the $1.02m owed for the loan and pocket the rest as profit. This makes sense. Reduction in debt with the proceeds. Just like the other poster, you

>They return the $1.02m owed for the loan and pocket the rest as profit. This makes sense. Reduction in debt with the proceeds. Just like the other poster, you are concocting a strategy that is not happening. You hypothetical does not apply. Instead, the companies are simply taking on debt and keeping it on their balance sheet.Now that there is a downturn, they cannot service the debt and need funding to operate (e.g. bailout) They are betting that the government will keep rates low or fund them in a time of crisis because they are too big, too important to fail. They've also bought up competition so they cannot just " go away" and let new entrants enter the market.

v64 7y ago
> Instead, the companies are simply taking on debt and keeping it on their balance sheet. Yes, my example is an admitted oversimplification. I was directly answering the question "why would a company use debt to finance a buy back?", not "why would a company use debt to finance a buy back and then leave that debt on their balance sheet for an extended period of time?" Although I suspect the answer to that question is that they didn't want to leave profit on the table and wanted to continue riding out the bull run, then got caught by the fastest bear market in history and weren't able to get out at a profit. Or that they believed they could eventually service the debt without having to reissue shares at all and ran out of time because of the crash.