Big U.S. companies don't know how American tax laws will bechanged in the coming months, but they're not waiting to findout.

Comcast, 3M Co. and Wal-Mart Stores are among the companiesbuying back bonds now in transactions that could save them millionsof dollars if the latest proposed tax changes from the Trumpadministration and Congress end up becoming law. A wave ofthese deals happened after the election as Republicans talked abouttax changes being high on their priority list. More of thesetransactions are happening now as the lawmakers and the White Houserenew their focus on overhauling the rules.

“If you're a company and you don't do it, you'll regret it,”said Tim Doubek, a Minneapolis-based money manager at ColumbiaThreadneedle. “There's no downside to doing it.”

Wal-Mart is buying back up to $8.5 billion of debt, and onWednesday sold $6 billion of bonds in six parts to help financethat repurchase. Blue-chip companies have sought to buy back aneye-popping $178.5 billion of bonds so far this year, compared with$87.3 billion at the same point last year, according to datacompiled by Bloomberg. Much of that activity is driven by possibletax changes, Doubek said. But these transactions make sense evenwithout tax reform, because they often allow companies to lock inlower rates on debt and push back the dates they would have torepay their borrowings.

The refinancing underscores how companies are looking to wringas much benefit as they can out of current tax laws even as theystand to benefit from future changes. Under current laws,corporations can deduct all of their interest payments from theirtaxable income. Republicans are considering limiting thatdeductibility, and lowering the standard corporate tax rate to 20%from 35%.

John Demming, a spokesman for Comcast, declined to comment. LoriAnderson, a spokeswoman for 3M, and Randy Hargrove, a spokesman forWal-Mart, didn't respond to requests for comment.

Companies that buy back their higher-interest debt in the comingweeks will pay more than the face value for this debt, whichamounts to pre-paying interest on those securities. They can fullydeduct those payments from their tax bills at current higherrates.

“With tax reform, these transactions are definitely becomingmore attractive,” said Ajay Khorana, global head of Citigroup'sfinancial strategy and solutions group. “Borrowers are trying to beproactive.”

Details of any tax overhaul are still hazy. The framework fortax reform that Republicans released on Sept. 27 said only thatinterest deductions “will be partially limited,” for example. Rep.Kevin Brady, chairman of the House Ways and Means Committee, saidbefore the release of the proposal that lawmakers plan tograndfather existing debt when it comes to deducting interestexpenses, but if corporate tax rates decline, companies would getless benefit from that full deduction than they can get now.

On Track?

The timing for any law to be passed is unclear. The 1986 taxreform took around two years to hammer out. This time around,Republicans hold both chambers of Congress, but control the Senateby only a slim majority. Donald Trump faces ideological demandsfrom Sen. Rand Paul of Kentucky and is feuding with Sen. BobCorker, who has been a vocal critic of the White House and wantstax cuts that don't add to the deficit. The president has hadprevious difficulty with votes from Sens. Susan Collins of Maineand Lisa Murkowski of Alaska. Rep. Brady said on Thursday thatoverhaul is still on track for this year.

Even with incomplete information about how new laws will look,companies have been positioning as best they can for any changes.The Republican plan to make it cheaper for companies to bringoverseas profit back to the U.S. has spurred some companies tofavor short-term borrowing recently, strategists at Bank of AmericaCorp. wrote in a report. When U.S. corporations bring cash fromforeign countries back home, they expect to use it to pay offdebt.

Gilead Sciences last month sold $3 billion of bonds to helpfinance an acquisition. All of the bonds it offered matured in twoyears or less, which is unusual for a bond offering that is fundinga purchase. The company has more than $30 billion of cash abroad,according to its filings.

From: Bloomberg News

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