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Developers Diversified announced a tender for short dated debt last night. The details:

Developers Diversified Realty Corporation (the "Company") (NYSE: DDR) today announced the commencement of a cash tender offer for any and all of its outstanding 5.00% Senior Notes due 2010, any and all of its outstanding 4.625% Senior Notes due 2010 and any and all of its outstanding 5.25% Senior Notes due 2011 (collectively, the "Notes").

There is currently approximately $151.3 million aggregate principal amount of the 5.00% Senior Notes due 2010 outstanding, approximately $176.3 million aggregate principal amount of the 4.625% Senior Notes due 2010 outstanding and approximately $179.2 million of the 5.25% Senior Notes due 2011 outstanding.

Bidside of the market on the debt is around 99.50, so the par tender isn't all that compelling. The company stated that the proceeds would be used to repay short-term debt. So it is. As stated earlier, they cannot replace this type of capital (debt) with similar capital due to the status of their covenants and the limited headroom available.

Bottom line: Why do the trade for such a small concession? The only reason is if you believe that the company will not be able to repay their ST debt. Taking out debt with coupons of 5% and 4 5/8% with equity is hardly premised on cost of capital improvements.

Disclosure: Long DDR preferreds

Source: Developers Diversified Announces Tender Offer for Short Debt