Debt Financing
Short definition
Debt financing is outside capital with a tenor, a coupon and covenants. It supplies a shield and discipline; cash service, collateral and lost flexibility are the cost.
Detailed explanation
Seniority, collateral and tenor set all-in and the distress queue. Short floating debt brings rate and refinancing risk forward; long fixed leaves economic duration risk.
It is the second rung on the pecking-order — until credit conditions close the rung. Then the “cheapness” of debt stays theoretical.
Why it matters for the CFO
The wrong tenor and currency produce default while EBITDA still looks solid. Debt capacity is CFADS and covenant headroom, not an EBITDA multiple.
How to read it
Read all-in, the shield and covenants together. “The coupon was cut” is not cheaper debt by itself.
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Definitions are educational. They are not investment, credit or tax advice.