public debt offerings

(noun)

A public debt offering is the offering of debt securities of a government, a company or a similar corporation to the public.

Related Terms

Examples of public debt offerings in the following topics:

  • Deficit Spending, the Public Debt, and Policy Making

    • Deficit spending and public debt are controversial issues within economic policy debates.
    • 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.
    • Deficit spending may, however, be consistent with public debt, remaining stable as a proportion of GDP, depending on the level of GDP growth.
    • US public debt consists of two components:
    • Economic growth offers the "win-win" scenario of higher employment, which increases tax revenue while reducing safety net expenditures for such things as unemployment compensation and food stamps.

  • Shelf Registration

    • Shelf registration is a type of public offering in which the issuer is allowed to offer several types of securities in a single prospectus.
    • Shelf registration or shelf offering is a type of public offering where certain issuers are allowed to offer and sell securities to the public without a separate prospectus for each act of offering.
    • The prospectus (often as part of a registration statement) may be used to offer securities for up to several years after its publication .
    • Shelf offerings, due to their purposefully time-constrained nature, are examined far less rigorously by those authorities, compared to standard public offerings.
    • Firms often use universal shelf filings and choose between debt and equity offerings based on the prevailing relative market conditions.

  • Total Debt to Total Assets

    • The debt ratio is expressed as Total debt / Total assets.
    • Debt ratios measure the firm's ability to repay long-term debt.
    • The debt/asset ratio shows the proportion of a company's assets which are financed through debt.
    • If the ratio is greater than 0.5, most of the company's assets are financed through debt.
    • A company with a high debt ratio (highly leveraged) could be in danger if creditors start to demand repayment of debt.

  • Comparing Common Stock, Preferred Stock, and Debt

    • Common stock, preferred stock, and debt are all securities that a company may offer; each of these securities carries different rights.
    • Preferred shares act like a hybrid security, in between common stock and holding debt.
    • However, both common and preferred stock fall behind debt holders when it comes to claims to assets of a business entity should bankruptcy occur.
    • Debt can be "purchased" from a company in the form of a bond.
    • It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest and/or to repay the principal at a later date, termed the maturity.

  • Advantages of Public Financing

    • The main advantage in seeking public financing is that it offers a larger pool of funding for the company than private financing alone.
    • A publicly traded company is a limited liability company that offers its securities for sale to the general public, typically through a stock exchange, or through market makers operating over the counter markets. .
    • Initial public offerings are used by companies to raise expansion capital, to monetize the investments of early private investors, and to become publicly traded enterprises.
    • When a company lists its securities on a public exchange, the money paid by the investing public for the newly issued shares goes directly to the company (primary offering) as well as to any early private investors who opt to sell all or a portion of their holdings (secondary offering) as part of the larger IPO.
    • Creating multiple financing opportunities, such as equity, convertible debt, and cheaper bank loans

  • Debt-to-Equity Ratio

    • The Debt-to-Equity Ratio is a financial ratio that compares the debt of a company to its equity and is closely related to leveraging.
    • The Debt-to-Equity Ratio is a financial ratio indicating the relative proportion of shareholder's equity and debt used to finance a company's assets, and is calculated as total debt / total equity.
    • Debt is typically a long-term liability that represents a company's obligation to pay both principal and interest to purchasers of that debt.
    • Calculating a company's debt to equity ratio is straight forward, and the debt and equity components can be found on a company's respective balance sheet.
    • For more advanced analysis, financial analysts can calculate a company's debt to equity ratio using market values if both the debt and equity are publicly traded.

  • Corporate Bonds

    • The opposite of secured debt is unsecured debt, which is not linked to any specific piece of property.
    • Senior debt has seniority over subordinated debt in the issuer's capital structure.
    • Subordinated debt is repaid after other debts in the case of liquidation or bankruptcy.
    • Such debt is referred to as subordinate, because the debt providers (the lenders) have subordinate status relative to the normal debt.
    • Because subordinated debt is repaid only after other debts have been paid, they are riskier for lenders.

  • Secured vs. Unsecured Funding

    • Debt refers to an obligation.
    • A loan is a monetary form of debt.
    • Generally speaking, secured debt may attract lower interest rates than unsecured debt due to the added security for the lender.
    • There are two purposes for a loan secured by debt.
    • The creditor may offer a loan with attractive interest rates and repayment periods for the secured 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

  • Differences Between Required Return and the Cost of Capital

    • The average cost of capital is calculated via combining the overall average required rate on debt stakeholders and equity stakeholders
    • Investors have options, and each of those options will offer a rate of return.
    • In the above equation, you have D as total debt, E as total equity, Kd as the required return on debt, and Ke as the required return on equity.
    • While this image goes into a bit more detail on the derivation of the cost of equity and the cost of debt, the final three boxes on the right ultimately demonstrate the way in which required rates balance out into a WACC (one for debt, one for equity).
    • Debt tends to be a lower rate because it is paid out first if a company goes bankrupt (i.e. lower risk).