This paper provides an investment-based rationale for the cash repurchase of publicly traded bonds.  I show that under certain circumstances, a cash repurchase of corporate debt via an open market purchase or tender offer can alleviate investment frictions and overcome the free-rider problem. Consistent with the investment-based model, firms are more likely to repurchase outstanding debt with cash either by open market transactions or tender offers when investment frictions are relatively high. Using the suspension of the cancellation of debt income tax in 2009 as a source of exogenous variation in the incentive to repurchase debt, I find that the quantity and quality of corporate investments increases following a reduction in leverage through a debt repurchase. The increase in corporate investment is more pronounced for firms with higher expected transfers to bondholders. The findings suggest that the market for debt repurchases provides a substitute for renegotiation of debt claims when coordination problems are present.