Long-Term Debt and Lease Financing参考.ppt

Long-Term Debt and Lease Financing 16 Chapter 16 - Outline Bonds Bond Terminology Priority of Claims on Bankruptcy Methods of Retiring (Repaying) Bonds Reading Bond Price Quotations 3 Types of Bond Yields Bond Ratings The Refunding Decision Other Forms of Bond Financing Advantages and Disadvantages of Debt 2 Types of Leases Advantages of Leasing Lease vs. Purchase Summary and Conclusions The Expanding Role of Debt Growth in corporate debt is attributed to: Rapid business expansion Inflationary impact on the economy Inadequate funds generated from the internal operations of business firms Expansion of the U.S. economy has placed pressure on U.S. corporations to raise capital New set of rules have been developed for evaluating corporate bond issues Times Interest Earned for Standard Poor’s Industrials Firms and governments “borrow” money from investors by selling bonds A bond is a written promise that the borrower (firm) will pay the lender (investor) at a stated future date, the principal plus a stated rate of interest Bonds differ from one another in terms of maturity (payment date), potential yield (interest rate), and investment quality (risk) Several companies rate the quality of various bonds Bond Terminology Par Value: principal or face value (usually $1,000) Coupon Rate: actual or stated interest rate Maturity Date: date when repayment of principal is due Indenture: legal document detailing the corporation’s obligations Secured Debt: where specific assets are pledged in the event of default Debenture: a L/T unsecured corporate bond Security provisions Secured claim specific assets are pledge to bondholders in the event of default. mortgage agreement real property is pledged as security for loan. Senior claims require satisfaction in liquidation proceedings prior to junior claims New property may become subject to a security provision by an “after acquired property clause” Unsecured Debt Debenture: an unsecured, long-term corpo