2 ms·
Doesn't this assume non-fixed rate loans, though? If you take out a $100M loan at 0.25% fixed then any movements by the Fed won't really affect you until you n
by mdorazio 11y ago
Doesn't this assume non-fixed rate loans, though? If you take out a $100M loan at 0.25% fixed then any movements by the Fed won't really affect you until you need to take out another loan. I've been under the impression from articles like [1] that the loans being used to fund stock repurchases are somewhat fixed rate.
[1] http://www.zerohedge.com/news/2014-07-08/stock-buyback-shocker-companies-using-secured-bank-loans-repurchase-stock http://www.zerohedge.com/news/2014-07-08/stock-buyback-shock...
- iofj 11y agoThey are, but they are relatively short term, 1-2 years. Plus companies don't just take out one, but they take them out regularly (and have done so for quite a while now). Since they revolve the credit, they effectively become variable interest rate. So when interest rates go up, they go up on 5-15% of the total debt every month or so. This does generate a delay. Unfortunately public companies don't have to disclose their financing conditions, so data on this is inaccurate at best unless you work at a bank.