They're required to pay a fixed interest rate on the debt. So during an economic downturn when profits dip, they can become insolvent. By comparison, when the c

They're required to pay a fixed interest rate on the debt. So during an economic downturn when profits dip, they can become insolvent. By comparison, when the capital came from stock, the dividends could adjust up and down with their profits. Like any form of leverage, it magnifies both the upside and downside risks.