The Debt Map
The funding instruments available to a private company, from bilateral bank credit to offshore issuance
The thesis
The fixed structuring cost, not the rate, is what determines the size from which the capital markets pay off. On a twenty million issuance, two million of fixed cost consumes ten per cent of the amount raised; at five hundred million, it consumes four tenths of one per cent
What the study establishes
1
The effective cost is always higher than the contracted coupon, because the costs come out of the amount raised
2
A small issuance needs rate savings that rarely exist to break even with bank credit
3
The indenture matters more than the spread, and almost no one reads it before signing
Contents
- Bank credit and its limits
- Debentures
- Securitisation and receivables funds
- Project finance
- The real cost
- Registration, rating and collateral
- Covenants and the trustee
- Issuing abroad
- The mandate