> If debt is priced too cheaply, HF will push companies to lever up to buyback stock. This is a socially useless form of activity, which increases business risk based on capital structure theory. Short term payoff, the debt will never go away.

Aren't stock repurchases generally a more tax-efficient vehicle for providing return to shareholders than dividends?

Also, why would the debt never go away? Companies usually raise debt by selling bonds with maturity dates.