The primary reason to buy AFC is balance sheet help. It is selling at the greatest discount to par, so it has the biggest gain on repurchase and the most help on the 200% statutory requirement issue.
I agree that the other debt is a better buy for ALD. Not only is due sooner, but the YTM is much higher so the return to ALD is mucher better.
Your point that it is not "cannot" buy AFC is wrong. ALD has agreed in the latest deal that it "cannot" buy AFC as long as the reissued notes are outstanding. It can buy the other public debt, but only under very special conditions.
the Company may repurchase its public debt; however, the Company is prohibited from repurchasing its common stock and may not pay dividends in excess of the minimum the Company reasonably believes is required to maintain its tax status as a regulated investment company. In addition, upon the occurrence of a change of control (as defined in the Note Agreement and Credit Agreement), the Noteholders have the right to be prepaid in full and the Company is required to repay in full all amounts outstanding under the Facility. This is from the most recent 8K. I have no idea what you've been reading.