What is "cheap debt" in finance?

Question

I hear it tossed around in Wall Street Journal, what does it mean please

for examples, companies getting financed through cheap debt

Answer 1

so far no one has actually answered you question in full. When Wall Street refers to cheap debt they are not speaking about it in the way most every day joe's look at debt. Companies routinely carry debt even though they may have large amounts of excess cash on hand. The reason is with cheap debt they have acquired the money at a rate that after depreciation and tax deductions for debt payments are computed it costs less to keep the debt then how much the money is earning in the companies investments. The reason this is possible is the company may borrow 100 million from 3 banks who know the company has a steller credit rating and charge an interest rate of 6% for example. They charge a lower rate to this company then to you or I because of the large reseerves the company has and because as a loan vs stock they are the first in line if the company goes under. After depreciation and tax deductions the effective rate the company is paying may be only 4%. They then use that money to buy an investment grade package of say mortgages that are payin 8%. They are now making 4% on money that is not theirs. This is one of the biggest reasons for the loan debacle that is happening in this country right now. Because the money was so cheap, companies were investing in loans that never should have been issued and making a killing until it all blew up in their face.

Answer 2

It's debt at the lowest possible interest rate, usually provided by investors. But even at a 'cheap' rate, too much debt is too much debt.

Answer 3

There is no such thing as cheap debt. the term is used to refer to relatively low interest rates. Even 0% usually costs more than cash.

Answer 4

The executive demands to step in and ensure that industry can be fined in the event that they rent illegals. A huge excellent that makes it no longer outsourcing to reduce American economics. That method none of this crap can be crisis. Cut the top off the operating computer exploiting those staff after which the crisis of them stealing American jobs can be solved.

Answer 5

The lender with the lowest (cheap) rates for loans .

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Answer 6

Usually it's low low low interest loans or even no interest loans given to a company.

Answer 7

There isn't an easy answer to this so one article gives examples- see link