CFA Practice Question

There are 266 practice questions for this study session.

CFA Practice Question

If a high-yield bond issuer wants to pay off its maturing loans, it can get cash from sources such as these EXCEPT FOR ______.

A. operating cash flow
B. borrowing in the high-yield commercial paper market
C. sale of assets
Correct Answer: B

There is no high-yield commercial paper market.

User Contributed Comments 7

User Comment
danlan2 can it issue new shares to raise capital?
ssradja maybe, you can't legally raise capital by issuing new equity and pay off your debt?
bmeisner A lot of time when a company is in trouble it is forced to raise equity via a placement or more likely a rights issue. Just look at UBS's most recent capital raise via a rights issue.
Rotigga The subject is High Yield bonds. Firms that are in this category would have great difficulty raising new equity for the purposes of paying of rolling debt, so it wouldn't be a viable option.
dblueroom raise capital is probably the last resort.
ljamieson Dozen's of co.s do it every day.
ascruggs92 Companies can legally issue new shares to raise cash for debt repayment. However, it can be seen as a red flag so it could cause the stock price to tank, causing the company to further dilute its current shareholders even more than they would have at higher share prices. And if you can't find a buyer for the new shares, you're out of luck
You need to log in first to add your comment.