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.
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 ...
The solution provides an understanding of the importance of a debt rating to a company and how it determines capital structure in 136 words.