Corporate Finance Haves and Have Nots
This article drives home a stark reality: Big firms have gobs of cash, they can easily issue bonds, and they enjoy access to credit. And the little guys? No, no and no.
But should borrowing be the first step for firms? Not necessarily. “If you have long-term usages, you should use long-term money,” says Bruce Lynn of the Financial Executives Consulting Group. A capital expenditure that amortizes over 20 years is better served by going out to the 20-year bond market, rather than getting LIBOR plus 200 in a three-year line of credit. Says Lynn, “LIBOR plus 200 today is cheaper than the bond market, but what happens three years from now? Interest rates won’t be this low in three years.”
Tags: Bruce Lynn, Corporate bond sales, Corporate Finance, credit facilities
