Which strategy issues new debt within a company and uses the proceeds to buy back some of the outstanding shares?

Leverage recapitalization is a financial strategy in which a company takes on new debt, using the funds raised to repurchase its own shares. This approach increases the company's financial leverage, as the amount of debt in the capital structure increases while reducing the number of equity shares outstanding.

The primary motivation behind this strategy is often to return capital to shareholders and to provide a more favorable return on equity as the earnings now relate to a smaller share base. By increasing debt, a company can take advantage of the tax deductibility of interest payments, which can enhance overall financial performance. This tactic is often employed when a company sees its stock as undervalued and believes that repurchasing shares will boost its market value.

In contrast, equity financing involves raising capital through the sale of shares, debt refinancing generally refers to the process of replacing existing debt with new debt under different terms, and asset liquidation includes selling off assets to raise cash, none of which fits the scenario where the company directly uses new debt to repurchase shares. Thus, leverage recapitalization is the correct strategy as it aptly describes the process of using newly issued debt to buy back outstanding equity.