What are some advantages and disadvantages of having a highly leveraged foreign subsidiary?

Answer 1

Hello,

A highly leveraged foreign subsidiary is a good place for off balance sheet borrowing. It is also a good tax write off! the disadvantages arethat that expesensive foreign subsidiary costs money in interest rate costs on loans and debt repayments
become a drain on resources. It weakens the overall financial picture of the parent company not to mention
the parent company values if that company is stock market quoted. A highly leveraged foreign subsidiary is a risk best sold off if the leverage cannot be quickly reduced.