Revenue Rise with Loans

Northwest Airlines and KLM decided what they wanted from each other and used the term alliance to describe their relationship. They structured their partnership as an interdependent relationship— that is, maintaining two separate corporate identities but acting as a single company in the eyes of their customers, allowing them to: Code-share, which gives them the [...]

A special situation occurs in the high-yield sector. The illiquidity in large parts of the universe causes price lags meaning that the aforementioned small changes in credit quality are not immediately reflected in bond prices. In the economic literature, this effect is known as non-trading. With respect to high-yield indices non-trading and non-synchronous trading of [...]

Having focused on indicators for the overall level of leverage so far, we will now switch to metrics that relate the ability to generate cash flows and profits to the interest burden. This helps to better capture liquidity problems in the short term, but goes at the expense of understanding the longer term vulnerability of [...]

While the choice of the most appropriate measure of corporate leverage is an arbitrary task, empirical studies indicate that the financing gap is able  to explain a lot of the variance in credit spreads. It is defined as the difference between capital expenditures, including outlays for inventories, and the amount of cash that corporations need [...]

Yet, free cash flow numbers are not available for all companies. European firms, for example, historically have published only profit figures. Therefore, we also look at EBIT and EBITDA figures. Of these two the latter is preferred because it deducts cash that is needed to maintain the operations. Specifically, on the macro level we use [...]

So far, we have identified a close correlation between credit spreads and future economic activity. When the economy is growing, usually each sector benefits from that growth. In the labor sector, economic growth typically leads to falling unemployment and rising wages. Historically, the corporate sector has benefited particularly during economic expansions. Not only did corporate [...]

For decades economists have analyzed the behavior of various economic indicators during the business cycle. Employment is commonly seen as one of the lagging indicators for the state of the economy. However, there is a leading indicator for the labor sector that coincides with changes in credit spreads. For example, for most of the time [...]