Debt management : a practitioner's guide / John D. Finnerty, Douglas R. Emery.

Format:

Book

Author/Creator:

Finnerty, John D.

Contributor:

Emery, Douglas R.

Series:

Financial Management Association survey and synthesis series

Language:

English

Subjects (All):

Corporate debt.

Debt.

Corporations--Finance.

Corporations.

Physical Description:

xvii, 430 pages : illustrations ; 25 cm.

Place of Publication:

Boston, Mass. : Harvard Business School Press, [2001]

Contents:

Debt Versus Equity 3

Types of Long-Term Debt 4

The U.S. Bond Market 5

Other Bond Market Participants 9

Obtaining Bond Information 11

Trends Affecting the Bond Market 12

The Role of Technology 20

Chapter 2 Commercial Debt Financing 21

Trade Credit 22

Short-Term Bank Debt 25

Commercial Paper 26

Term Loans 28

Leasing 32

Contracting Costs, Agency Costs, and Debt Maturity 34

Private Placements 35

Chapter 3 Debt Capital Markets 43

Overview of the Corporate Bond Market 43

Public Bond Market 45

Investment Banking and the Cost of Issuing Securities 49

Frequency and Timing of Borrowings 55

Public Offering Versus Private Placement 55

International Debt Financing 58

Chapter 4 High-Yield Debt 67

Market Overview 67

Debt Ratings and the Risk of Default 73

Historical Returns on High-Yield Debt 75

Credit Analysis 78

Distressed Debt 83

Emerging-Market Debt 84

Chapter 5 New Issue Design 87

Basic Bond Features 87

Bond Investors' Required Return 92

Financial Contracting 94

Research on Corporate Debt Provisions 105

Designing a Long-Term Debt Issue: Some Practical Considerations 112

Chapter 6 Institutional Considerations 117

Taxation of Debt Instruments 118

Taxation of Debt with Contingent Payments 124

Taxation of Dividends 126

General Tax Consequences of a Bond Refunding 126

Accounting Considerations 128

Fixed-Rate Capital Securities: Tax Deductible Equity? 132

Chapter 7 Fixed-Income Derivatives 137

Basic Building Blocks 137

Hedging 141

Relationships Among the Basic Building Blocks 147

Swaptions 149

Interest Rate Caps, Floors, and Collars 149

More Complex Floating-Rate Notes 152

Structured Products 159

Chapter 8 Debt Innovations 165

Sources of Value Added 166

Value Added from Structuring Securities to Reduce or Reallocate Risk 181

Structures for Reallocating Prepayment Risk 184

Structures for Reducing or Reallocating Default Risk 187

Chapter 9 Valuing Bonds and Bank Loans 199

Discounted-Cash-Flow Analysis 199

Measuring Bond Yield 202

Valuing Floating-Rate Bonds and Bank Loans 204

Drawbacks to Traditional Yield Spread Analysis 207

Bonds with Embedded Options 207

The Binomial Valuation Model: Preliminary Concepts 210

Constructing the Binomial Interest Rate Tree 214

Valuing Bonds 220

Incorporating Default Risk: The Option-Adjusted Spread 226

Chapter 10 Bond Refunding: Measuring the Net Advantage 231

Overview of Bond Refunding 232

Discounted-Cash-Flow Analysis 233

Debt Service Parity 234

Choice of Discount Rate 235

A Single-Period Example 235

General Analytical Framework 237

Discounted-Cash-Flow Model 239

An Example of a Bond Refunding 241

A More Exact Debt Service Parity Model 243

Premium Debt Swaps 245

Impact of a Sinking Fund 246

Exchanging Debt for Other Securities 247

Chapter 11 Bond Refunding: The Timing Decision 251

Break-Even Analysis 252

Refunding Efficiency 253

A Binomial Model for the Call-or-Wait Decision 259

Synthetic Bond Call Options 269

Tender Offers and Open Market Purchases 270

Chapter 12 Sinking-Fund Management 275

Types of Sinking Funds 275

Overview of Sinking-Fund Management 277

Refunding Discounted Debt 279

Advance Purchases of Low-Coupon Bonds 284

Impact of Accumulation 285

A Binomial Model for Sinking-Fund Management 286

An Example of a Sinking-Fund Analysis 294

Case Study: Sinking-Fund Management at the World Bank 297

Chapter 13 Other Types of Bond Refundings 303

Refunding Floating-Rate Debt 303

Defeasance 304

Advance Refunding of Corporate Debt 311

Refunding Under Rate Base Regulation 319

Refunding Tax-Exempt Corporate Bonds 322

Chapter 14 Preferred Stock and Preference Stock 329

Main Features of Preferred Stock 329

Financing with Preferred Stock 331

Valuing Preferred Stock 331

Preferred Stock Innovations 332

Refunding Preferred Stock 337

Altering Capital Structure 342

Chapter 15 Convertible Securities 347

Convertible Security Features 347

Why Firms Issue Convertible Securities 349

Valuing Convertible Bonds 351

Forced Conversions 353

Convertible Preferred Stock 355

Convertible Securities Innovations 356

An Example Using a Securities Innovation 362

Chapter 16 The Future of Debt Management 369

The Future of Debt Markets 370

The Future of Securitization 371

The Future of Securities Innovation 372

The Future of Fixed-Income Derivatives and Hedging 373

The Future of Innovative Corporate Finance Strategies 374

The Importance of Active Debt Management 374

The Future of Fixed-Income Valuation 376.

Notes:

Includes bibliographical references and index.

ISBN:

0875846173

OCLC:

45835477