CompanyGraph
Captures cash inflow from new borrowing, exposing the company's reliance on debt markets to fund its activities.
Debt issued represents cash received from borrowing, such as issuing bonds or taking on new loans. It appears under financing activities.
Debt issued represents cash received from borrowing money through various debt instruments. This financing activity increases the company's liabilities and leverage, providing capital for operations, investments, acquisitions, or refinancing existing obligations. Debt issuance is a key tool for funding growth without diluting shareholders, though it creates fixed obligations that must be repaid.
Types of debt issuance:
- Bonds: Long-term securities sold to institutional investors
- Term loans: Bank borrowings with set repayment schedules
- Revolving credit: Flexible borrowing facilities; draw and repay as needed
- Commercial paper: Short-term borrowing for working capital
- Convertible debt: Bonds that can convert to equity
- Private placements: Direct loans from institutional lenders
Cash flow presentation:
Proceeds from issuance of debt: $750 million or Long-term borrowings: $750 million
Why debt issuance matters:
- Leverage impact: Increases financial risk but can boost equity returns
- Interest obligation: Creates fixed costs regardless of business performance
- Tax benefit: Interest payments are tax-deductible
- No dilution: Unlike equity, debt doesn't reduce ownership percentage
Analysing debt issuance:
- Use of proceeds: Growth investment, refinancing, acquisitions, or shareholder returns?
- Net debt change: New issuance minus repayments shows true leverage increase
- Interest rate: Cost of new borrowing versus existing debt
- Maturity profile: Short-term debt creates refinancing risk
Positive interpretations:
- Growth funding: Borrowing to finance value-creating investments
- Opportunistic refinancing: Replacing high-rate debt with lower-rate
- Capital structure optimisation: Adding appropriate leverage to under-leveraged balance sheet
Concerning patterns:
- Funding losses: Borrowing to cover operating deficits
- Leverage spiral: Debt growing faster than earnings capacity
- Unfavourable terms: High rates or restrictive covenants indicating credit stress
Evaluate debt issuance in the context of overall leverage, earnings stability, and intended use. Prudent borrowing at attractive rates for productive investments creates value; excessive leverage to fund losses or overpriced acquisitions destroys it.