[经管营销]Module 3_ DebtCF Module 3_ Long-term Debt.pdf

Corporate Finance Hao Wang Tsinghua University Spring 2011 Hao Wang (Tsinghua University) Module 3: Long-term Debt Spring 2011 1 / 43 Long-term Debt (Corporate Finance 9th Edition Chapter 15) Hao Wang (Tsinghua University) Module 3: Long-term Debt Spring 2011 2 / 43 The basics of a long-term Önancing Hao Wang (Tsinghua University) Module 3: Long-term Debt Spring 2011 3 / 43 Roadmap Basic features of long-term debt Indenture (Debt contract, zhai wu qi yue ) The main provisions security, seniority, covenants, and provisions Call provision How to evaluate bond refunding? Credit ratings (xin yong ping ji ) and Moody KMVís EDF Types of corporate bonds Where to borrow long-term debt? Hao Wang (Tsinghua University) Module 3: Long-term Debt Spring 2011 4 / 43 Review of long-term debt Debt is NOT an ownership interest in a Örm. Long-term (funded) debt has maturity over 1 year vs. short-term (unfunded) debt. Face value (typically $1000) also called principal or par value What is meant by a discount, par and above-par bond? Interest is paid out of before-tax dollars, so debt is tax-favored compared to equity where dividends are paid from after-tax dollars. Unpaid debt is a liability of the Örm. If it is not paid, the creditors can legally claim the remaining assets of the Örm. Hao Wang (Tsinghua University) Module 3: Long-term Debt Spring 2011 5 / 43 Hao Wang (Tsinghua University) Module 3: Long-term Debt Spring 2011