[djakjxnanjak]

Our tax policy encourages this. You can write off the interest you pay to bondholders, but you can’t write off the dividends you pay to shareholders. Everyone involved (except for the government) is better off if you sell bonds and buy back stock.

[mathattack]

Prior debt holders get punished as companies lever up. (But they usually don’t get a say in the matter unless they have strong covenants)

Heavily indebted companies struggle to survive distress too.

[kgwgk]

The recent reform puts some limits on deductibility of interest expenses, but I don’t know what is the practical impact of that cap (30% of adjusted taxable income = earnings before interest, depreciation, amortization, and taxes).