non-recourse debt

Examples of non-recourse debt in the following topics:

• Current Obligations Expected to Be Refinanced

  • Refinancing may refer to the replacement of an existing debt obligation with a debt obligation under different terms.
  • If the replacement of debt occurs under financial distress, refinancing might be referred to as debt restructuring.
  • A loan or other type of debt can be refinanced for various reasons:
  • In some jurisdictions, refinanced mortgage loans are considered recourse debt, meaning that the borrower is liable in case of default, while un-refinanced mortgages are non-recourse debt.
  • Refinanced debt must be finalized and the new loan terms approved before reporting it and replacing it for the old debt in the liability section.

• Factoring Accounts Receivable

  • There are two principal methods of factoring: recourse and non-recourse.
  • Under recourse factoring, the client is not protected against the risk of bad debts.
  • On the other hand, the factor assumes the entire credit risk under non-recourse factoring (i.e., the full amount of invoice is paid to the client in the event of the debt becoming bad).
  • Other variations include partial non-recourse, where the factor's assumption of credit risk is limited by time, and partial recourse, where the factor and its client (the seller of the accounts) share credit risk.
  • Accordingly, the factor obtains the right to receive the payments made by the debtor for the invoice amount and, in non-recourse factoring, must bear the loss if the account debtor does not pay the invoice amount due solely to his or its financial inability to pay.

• Secured vs. Unsecured Funding

  • Seizure of real estate for non-payment is also known as foreclosure.
  • Seizure of an automobile for non-payment is also known as repossession.  
  • Debt refers to an obligation.
  • A loan is a monetary form of debt.
  • Interest rates on unsecured loans are nearly always higher than for secured loans, because an unsecured lender's options for recourse against the borrower in the event of default are severely limited.

• Debt

  • Debt is usually granted with expected repayment.
  • The various types of debt can generally be categorized into:
  • A debt obligation is considered secured if creditors have recourse to the assets of the company on a proprietary basis or otherwise ahead of general claims against the company.
  • Unsecured debt comprises financial obligations, where creditors do not have recourse to the assets of the borrower to satisfy their claims.
  • Treasury bills are one kind of debt issued by the U.S.

• Debt Finance

  • A company uses various kinds of debt to finance its operations .
  • The various types of debt can generally be categorized into:
  • A debt obligation is considered secured, if creditors have recourse to the assets of the company on a proprietary basis or otherwise ahead of general claims against the company.
  • Unsecured debt comprises financial obligations, where creditors do not have recourse to the assets of the borrower to satisfy their claims.
  • A basic loan or "term loan" is the simplest form of debt.

• Debt to Equity

  • The debt-to-equity ratio (D/E) indicates the relative proportion of shareholder's equity and debt used to finance a company's assets.
  • The formula of debt/equity ratio: D/E = Debt (liabilities) / equity.
  • A similar ratio is the ratio of debt-to-capital (D/C), where capital is the sum of debt and equity:D/C = total liabilities / total capital = debt / (debt + equity)
  • The debt-to-total assets (D/A) is defined asD/A = total liabilities / total assets = debt / (debt + equity + non-financial liabilities)
  • Debt to equity can also be reformulated in terms of assets or debt: D/E = D /(A – D) = (A – E) / E

• Debt Utilization Ratios

  • In this case, it has a debt ratio of 200%.
  • The debt ratio is a financial ratio that indicates the percentage of a company's assets that are provided via debt.
  • D/E = Debt(liabilities)/Equity.
  • The debt service coverage ratio (DSCR), also known as debt coverage ratio (DCR), is the ratio of cash available for debt servicing to interest, principal, and lease payments.
  • DSCR = (Annual Net Income + Amortization/Depreciation + Interest Expense + other non-cash and discretionary items (such as non-contractual management bonuses)) / (Principal Repayment + Interest payments + Lease payments)

• Deficit Spending, the Public Debt, and Policy Making

  • Government debt is the debt owed by a central government.
  • Government debt can be categorized as internal debt (owed to lenders within the country) and external debt (owed to foreign lenders).
  • Sovereign debt usually refers to government debt that has been issued in a foreign currency.
  • Otherwise the debt issuance can increase the level of (i) public debt, (ii) private sector net worth, (iii) debt service (interest payments) and (iv) interest rates.
  • Debt held by government accounts or intragovernmental debt includes non-marketable Treasury securities held in accounts administered by the federal government that are owed to program beneficiaries, such as the Social Security Trust Fund.

• Women and Slavery

  • While free or white women could charge their perpetrators with rape, slave women had no legal recourse.
  • Slave owners might decide to sell families or family members for profit, as punishment, or to pay debts.

• Times-Interest-Earned Ratio

  • Times Interest Earned ratio (EBIT or EBITDA divided by total interest payable) measures a company's ability to honor its debt payments.
  • Times interest earned (TIE), or interest coverage ratio, is a measure of a company's ability to honor its debt payments.
  • When a firm does not have non-operating income, then operating income is sometimes used as a synonym for EBIT and operating profit.
  • Times Interest Earned or Interest Coverage is a great tool when measuring a company's ability to meet its debt obligations.
  • Use a company's index coverage ratio to evaluate its ability to meet its debt obligations