英文文献翻译.docx
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英文文献翻译.docx
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英文文献翻译
届毕业生外文文献翻译
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CorporateDebt
Whentheyborrowmoney,companiespromisetomakeregularinterestpaymentsandtorepaytheprincipal(thatis,theoriginalamountborrowed).However,corporationshavelimitedliability.Bythiswemeanthatthepromisetorepaythedebtisnotalwayskept.Ifthecompanygetsintodeepwater,thecompany’sassetstothelenders.
Clearlyitwillchoosebankruptcyonlyifthevalueoftheassetsislessthantheamountofthedebt.Inpractice,whencompaniesgoobankrupt,thishandoverofassetsisfarfromstraightforward.Forexample,whenPacificGasandElectricfiledforbankruptcyin2004,thebankruptcycourtwasfacedwithseveralthousandcreditorsalljostlingforabetterplaceinthequeue.Bythetimethecompanyhademergedfrombankruptcy3yearslater,ithadagreedtomake2,100separatepaymentsresolving$8.4billionofagreedclaimsandhadsetasideafurther$1.8billionforclaimsthatwerestillunderdispute.
Becauselendersarenotregardedasownersofthefirm,theydon’tnormallyhaveanyvotingpower.Also,thecompany’spaymentsofinterestareregardedasacostandarethereforedeductedfromtaxableincome.Thusinterestispaidoutofbefore-taxincome,whereasdividendsoncommonandpreferredstockarepaidoutofafter-taxincome.Thismeansthatthegovernmentprovidesataxsubsidyontheuseofdebt,whichitdosenotprovideonstock.
Someorderlyschemeofclassificationisessentialtocopewiththealmostendlessvarietyofdebtissues.
InterestRate
Theinterestpayment,orcoupon,onmostlong-termloansisfixedatthetimeofissue.Ifa$1,000bondisissuedwithacouponof10percent,thefirmcontinuestopay$100ayearregardlessofhowinterestrateschange.AswepointedoutinChapter4,yousometimesencounterzero-couponbonds.Inthiscasethefirmdoesnotmakearegularinterestpayment.Itjustmakesasinglepaymentatmaturity.Obviously,investorspaylessforzero-couponbonds.
Mostloansfromabankandsomelong-termloanscarryafloatinginterestrate.Forexample,yourfirmmaybeofferedaloanat“Ipercentoverprime.”Theprimerateisthebenchmarkinterestratechargedbybankstolargecustomerswithgoodtoexcellentcredit.(Butthelargestandmostcreditworthycorporationscan,anddo,borrowatlessthanprime.)Theprimerateisadjustedupanddownwiththegenerallevelofinterestrates.Theprimerateisadjustedupanddownwiththegenerallevelofinterestrates.Whentheprimeratechanges,theinterestonyourfloating-rateloanalsochanges.
Floating-rateloansarenotalwaystiedtotheprimerate.Oftentheyaretiedtotherateatwhichinternationalbankslendtooneanother.ThisisknownastheLondonInterbankOfferedRate,orLIBOR.
Maturity
Fundeddebtisanydebtrepayablemorethan1yearfromthedataofissue.Debtdueinlessthanayearistermedunfundedandiscarriedonthebalancesheetasacurrentliability.Unfundeddebtisoftendescribedasshort-termdebt,andfundeddebtisdescribedaslong-term,althoughitisclearlyartificialtocalla364-daydebtshort-termanda366-daydebtlong-term(exceptinleapyears).
Therearecorporatebondsofnearlyeveryconceivablematurity.Forexample,BristolMyersSquibbhasissuedbondsthatdonotmatureuntil2097.SomeBritishbankshaveissuedperpetuities—thatis,bondswhichmaysurviveforever.Attheotherextremewefindfirmsborrowingliterallyovernight.
RepaymentProvisions
Long-termloansarecommonlyrepaidinasteadyregularway,perhapsafteraninitialgraceperiod.Forbondsthatarepubliclytraded,thatisdonebymeansofasinkingfund.Eachyearthefirmputsasideasumofcashintoasinkingfundthatisthenusedtobuybackthebonds.Whenthereisasinkingfund,investorsarepreparedtolendatalowerrateofinterest.Theyknowthattheyaremorelikelytoberepaidononespecifiedday.
Supposethatacompanyissuesa6percent,30-yearbondatapriceof$1,000.Fiveyearslaterinterestrateshavefallento4percent,andthepriceofthebondhasrisendramatically.Ifyouwerethecompany’treasurer,wouldn’tyouliketobeabletoretirethebondsandissuesomenewbondsatthelowerinterestrate?
Well,withsomebonds,knownascallablebonds,thecompanydoeshavetheoptiontobuythembackforthecallprice.Ofcourse,holdersofthesecallablebondsknowthatthecompanywillwishtobuytheissuebackifinterestratesfall,andthereforethepriceofthebondwillnotriseabovethecallprice.
Acallablebondgivesthecompanytheoptiontoretirethebondsearly.Butsomebondsgivetheinvestortherighttodemandearlyrepayment.Duringthe1990smanyloanstoAsiancompaniesgavetheleadersarepaymentoption.Consequently,whentheAsiancrisisstruckin1997,thesecompanieswerefacedbyafloodofleadersdemandingtheirmoneyback.Needlesstosay,companiesthatwerealreadystrugglingtosurvivedidnotappreciatethisadditionalburden.
Seniority
Somedebtsaresubordinated.Intheeventofdefaultthesubordinatedlendergetsinlinebehindthefirm’sgeneralcreditors.Thesubordinatedlenderholdsajuniorclaimandispaidonlyafterallseniorcreditorsaresatisfied.
Whenyoulendmoneytoafirm,youcanassumethatyouholdaseniorclaimunlessthedebtagreementsaysotherwise.However,thisdosenotalwaysputyouatthefrontoftheline,forthefirmmayhavesetasidesomeofitsassetsspecificallyfortheprotectionofotherlenders.Thatbringsustoournextclassification.
Security
Whenyouborrowtobuyyourhome,thesavingsandloancompanywilltakeoutamortgageonthehouse.Themortgageactsassecurityfortheloan.Ifyoudefaultontheloanpayments,theS&Lcanseizeyourhome.
Whencompaniesborrow,theyalsomaysetasidecertainassetsassecurityfortheloan.Theseassetsaretermedcollateral,andthedebtissaidtobesecured.Intheeventofdefault,thesecuredlenderhasfirstclaimonthecollateral;unsecuredlendershaveageneralclaimontherestofthefirm’sassetsbutonlyajuniorclaimonthecollateral
DefaultRisk
Seniorityandsecuritydonotguaranteepayment.Adebtcanbeseniorandsecuredbutstillasriskyasadizzytightropewalker—itdependsonthevalueandtheriskofthefirm’sassets.InChapter5weshowedhowthesafetyofmostcorporatebondscanbejudgedfrombondratingsprovidedbyMoody’sandStandard&Poor’s.bondsthatarerated“triple-A”seldomdefault.Attheotherextreme,manyspeculative-grade(or“junk”)bondsmaybeteeteringonthebrink.
CountryandCurrency
ThesedayscapitalmarketsknowfewnationalboundariesandmanylargefirmsintheUnitedStatesborrowabroad.Forexample,anAmericancompanymaychoosetofinanceanewplantinSwitzerlandbyborrowingSwissfrancsfromaSwissbank,oritmayexpanditsDutchoperationbyissuingabondinHolland.AlsomanyforeigncompaniescometotheUnitedStatestoborrowdollars,whicharethenusedtofinancetheiroperationsthroughouttheworld.
Inadditiontothesenationalcapitalmarkets,thereisalsoaninternationalcapitalmarketcenteredmainlyinLondon.BanksfromallovertheworldhavebranchesinLondon.TheyincludesuchgiantsasCiticorp,USB,DeutscheBank,BankofTokyo-Mitsubishi,HSBC,andBNPParibas.Onereasontheyarethereistocollectdepositsinthemajorcurrencies.Forexample,supposeanArabsheikhhasjustreceivedpaymentindollarsforalargesaleofoiltotheUnitedStates.RatherthandepositingthecheckintheUnitedStates,hemaychoosetoopenadollaraccountwithabankinLondon.DollarsheldinabankoutsidetheUnitedStatescametobeknownasEurodollars.Similarly,yenheldoutsideJapanweretermedeuroyen,andsoon.
TheLondonbankbranchthatisholdingthesheikh’sdollardepositmaytemporarilylendthosedollarstoacompany,inthesamewaythatabankintheUnitedStatesmayrelenddollarsthathavebeendepositedwithit.ThusacompanycaneitherborrowdollarsfromabankintheUnitedStatesorborrowfromabankinLondon.
Ifafirmwantstomakeanissueoflong-termbonds,itcanchoosetodosointheUnitedStates.Alternatively,itcansellthebondstoinvestorsinseveralcountries.BecausetheseinternationalissueshaveusuallybeenmarketedbytheLondonbranchesofinternationalbanks,theyhavetraditionallybeenknownasEurobonds.AEurobondmaybedenominatedindollars,yen,oranyothercurrency.Unfortunately,whenthesingleEuropeancurrencywasestablisheditwascalledtheeuro.Itiseasy,therefore,toconfuseaEurobond(abondthatissoldinternationally)withabondthatisdenominatedineuros.
PublicversusPrivatePlacements
Publiclyissuedbondsaresoldtoanyonewhowishestobuy,andoncetheyhavebeenissued,theycanbefreelytradedinthesecuritiesmarkets.Inaprivateplacement,theissueissolddirectlytoasmallnumberofbanks,insurancecompanies,orotherinvestmentinstitutions.PrivatelyplacedbondscannotberesoldtoindividualsintheUnitedStatesbutcanberesoldonlytootherqualifiedinstitutionalinvestor.However,thereisincreasinglyactivetradingamongtheseinvestors.
ProtectiveCovenants
Whentheinvestorslendtoacompany,theyknowthattheymightnotgettheirmoneyback.Buttheyexceptthatthecompanywillusetheirmoneywellandnottakeunreasonablerisks.Tohelpensurethis,lendersusuallyimposeanumberofconditions,orprotectivecovenants,oncompaniesthatborrowfromthem.Anhonestfirmiswillingtoaccepttheseconditionsbecauseitknowsthattheyenablethefirmtoborrowatareasonablerateofinterest.
Companiesthatborrowinmoderation
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