Ratings and cost of debt (1)

Ratings and cost of debt (1) - Finance For Executives...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Finance For Executives INSEAD Ratings and the Cost of Debt Based upon US firms. Estimated spreads as of January 2003. Using the interested coverage ratio of a company, these tables give an estimate of the credit rating and the associated cost of debt (spread above the US-Treasury bill rate) For manufacturing firms For financial services firms If interest coverage ratio is If long term interest coverage ratio is greater than to Rating is Spread is greater than to Rating is Spread is -100000 0.20 D 14.00% -100000 0.05 D 14.00% 0.20 0.65 C 12.70% 0.05 0.10 C 12.70% 0.65 0.80 CC 11.50% 0.10 0.20 CC 11.50% 0.80 1.25 CCC 10.00% 0.20 0.30 CCC 10.00% 1.25 1.50 B- 8.00% 0.30 0.40 B- 8.00% 1.50 1.75 B 6.50% 0.40 0.50 B 6.50% 1.75 2.00 B+ 4.75% 0.50 0.60 B+ 4.75% 2.00 2.50 BB 3.50% 0.60 0.80 BB 3.50% 2.50 3.00 BBB 2.25% 0.80 1.00 BBB 2.25% 3.00 4.25 A- 2.00% 1.00 1.50 A- 2.00% 4.25 5.50 A 1.80% 1.50 2.00 A 1.80% 5.50 6.50 A+ 1.50% 2.00 2.50 A+ 1.50% 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Finance For Executives INSEAD 6.50 8.50
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/20/2011 for the course FINANCE 640,722 taught by Professor Chabiyo,reeves during the Fall '11 term at Ohio State.

Page1 / 2

Ratings and cost of debt (1) - Finance For Executives...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online