Debt Ratings and Capital Structure
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Explain why selecting a target senior debt rating is a reasonable approach to choosing a capital structure. Explain why a target senior debt rating of single-A is a prudent objective when there is only a very limited new issue market for non-investment-grade debt, and when investor willingness to purchase triple-B-rated debt is likely to be highly sensitive to the state of the economy.
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Solution Summary
The solution provides an understanding of the importance of a debt rating to a company and how it determines capital structure in 136 words.
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1. The senior debt rating determines the interest rate that will be commanded on the debt. To determine a capital structure or a stock bond mix for financing, the issuer must be able to ...
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