Suppose a company is choosing between bank loans and bonds. The company is highly levered already, and has a credit rating of BB+. A bank is offering an interest rate of 5.5% to lend the money to the firm and requires the company to post collateral and comply with financial covenants. The firm also contacted an investment bank, which predicted that in current market conditions the company may be able to issue a junk bond of the same value as the bank loan, at a 7% coupon. 

What would you pick if you were the CFO of the company?

Answer rating: 100% (QA)

As the CFO of the company there are several factors that need to be considered while choosing betwee... View the full answer