Corporate Long Term Debt

Corporate long-term debt: 

1)The payment of interest on debt is considered a cost of doing business and is fully tax-deductible. Because interest expense can be used to reduce taxes, the government is providing a direct tax subsidy on the use of debt when compared to equity.

2)When corporations try to create a debt security that is really equity, they are trying to obtain the tax benefits of debt while eliminating its bankruptcy costs.

3)Long-term debt almost always has a par value equal to the face value, and debt price is often expressed as a percentage of the par value.

4)A debenture is an unsecured corporate debt, whereas a bond is secured by a mortgage on the corporate property. However, in common usage the word Bond often refers to both secured and unsecured debt. A note usually refers to an unsecured debt with a maturity shorter than that of a debenture, perhaps under 10 years.

5)Repayment: long-term debt is typically repaid in regular amounts over the life of the debt. The payment of long-term debt by installment is called amortization. At the end of the amortization the entire indebtedness is said to be extinguished.

6)Indenture: the written agreement b/w the corporate debt issuer and the  lender, setting forth maturity date, interest rate, and all other terms, is called an indenture.

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