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Basic Question 1 of 2
If a high-yield bond issuer wants to pay off its maturing loans, it can get cash from sources such as these EXCEPT FOR ______.
B. borrowing in the high-yield commercial paper market
C. sale of assets
A. operating cash flow
B. borrowing in the high-yield commercial paper market
C. sale of assets
User Contributed Comments 7
| User | Comment |
|---|---|
| danlan2 | can it issue new shares to raise capital? |
| ssradja | maybe, you can't legally raise capital by issuing new equity and pay off your debt? |
| bmeisner | A lot of time when a company is in trouble it is forced to raise equity via a placement or more likely a rights issue. Just look at UBS's most recent capital raise via a rights issue. |
| Rotigga | The subject is High Yield bonds. Firms that are in this category would have great difficulty raising new equity for the purposes of paying of rolling debt, so it wouldn't be a viable option. |
| dblueroom | raise capital is probably the last resort. |
| ljamieson | Dozen's of co.s do it every day. |
| ascruggs92 | Companies can legally issue new shares to raise cash for debt repayment. However, it can be seen as a red flag so it could cause the stock price to tank, causing the company to further dilute its current shareholders even more than they would have at higher share prices. And if you can't find a buyer for the new shares, you're out of luck |
I just wanted to share the good news that I passed CFA Level I!!! Thank you for your help - I think the online question bank helped cut the clutter and made a positive difference.
Edward Liu
Learning Outcome Statements
contrast the long-term funding of investment-grade versus high-yield corporate issuers
CFA® 2025 Level I Curriculum, Volume 4, Module 4.