Julie Crawshaw

U.S. corporations are quietly buying back their bonds on the open market for prices well below the sums investors paid them, taking advantage of depressed prices to save millions of dollars in interest and debt-repayment costs.

For example, Hexion Specialty Chemicals, owned by private equity firm Apollo Management, recently bought back their debt for as little as 22 cents on the dollar, The Wall Street Journal reports.

Struggling Beazer Homes (BZH) bought their debt for 50 cents on the dollar.

Compared to paying 100 cents at maturity, these are some stellar returns on capital for companies with cash on hand.

Shareholders learned of the buybacks when corporations filed their second quarter financial reports.

"No one wants to announce a bond or loan buyback until they have to, as that will move prices," Tom Newberry, head of leveraged finance at Credit Suisse in New York, told The Wall Street Journal.

"Those firms that can do this quietly and under the radar screen can buy more cheaply and chip away at their maturities."

Buying back debt cheaply allows firms to boost bottom lines by recording accounting gains but solves no real problems.

"You can rearrange the deck chairs all you want, but these are mostly short-term fixes," said former Wall Street banker Daniel Toscano.

"At some point, something's got to give and someone in the food chain will lose money."

Bloomberg reports that Warren Buffett was a big buyer of corporate bonds in the second quarter as well, as his company’s spending on stocks fell to its lowest level in five years.