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Trying to wrap my head around this. Is this different from Convertible Debt? Also, why raise at 10% interest when interest rates are so low?
by calvinbhai 6y ago
Trying to wrap my head around this.
Is this different from Convertible Debt?
Also, why raise at 10% interest when interest rates are so low?
- seemslegit 6y agoInterests rate are low for low-risk borrowers, Airbnb isn't one.
- ceejayoz 6y ago> Also, why raise at 10% interest when interest rates are so low? Interest rates on a house reflect the fact that the bank can repossess it if you stop paying. AirBnB's higher interest rate reflects the chance that there'll be nothing left.
- safog 6y agoCorporate bond yields spiked due to business risks posed by Covid19. B rated bonds went from ~5% to >10.65% https://ycharts.com/indicators/us_high_yield_b_effective_yield https://ycharts.com/indicators/us_high_yield_b_effective_yie...
- knes 6y agoa preferred Payment In Kind (PIK) is not the same as a high yield bond. PIK is closer to equity so a 10% interest is pretty high
- rchaud 6y ago> Also, why raise at 10% interest when interest rates are so low? There's an old proverb in finance that goes: "If you borrow a million and can't pay it back, you're in trouble. If you borrow a billion and can't pay it back, the bank's in trouble." There was no way Airbnb was going to get that kind of cash at anywhere near 'market rates'.