Investor Profile Paper – Essay Example
Investor Profile – Deducing the Debt [School] Number] September Investor Profile Paper – Deducing the debt
The essay analyses the debts taken by Home Depot.
Home Depot has raised debts primarily from two sources:
Senior Notes: A class of debt which has preference over subordinated debts in case of liquidation of the company (Dictionary). Home depot had raised close to $8,662 million in the year 31st January 2010 (Depot, 2010). Senior notes pays a very low interest rate and hence are a source of funds at cheaper rates for Home Depot for longer periods. Home Depot can pay it off any time it wants at a predecided rates with the lenders. The size of senior debts are generally of large value provided by investment banks, financial instituitons and corporates. Such debts generally indicates confidence in the company by the debt lenders because they commit large funds at a regular intervals and low interest rates.
Commercial Paper Program: Home depot has commercial paper programs that allow for borrowings upto $3.5 billion for their short term needs (Depot, 2010). Home Depot being a retail company, working capital requirement are very high which calls for readily avaiable funds. Commercial papers fills in that requirements of Home Depot. Commercial paper are short term debt instruments issued at discount with maturities not more than 270 days (Investopedia, Commercial Paper). This debt instrument does not require any collateral backing and registration with Securities and Exchange Commission making it a relatively cheaper source of short term financing.
Depot, H. (2010). Annual Report 2010. Home Depot.
Dictionary, F. (n.d.). Senior Debt. Retrieved 3 25, 2011, from Financial Dictionary: http://financial-dictionary.thefreedictionary.com/Senior+Debt
Investopedia. (n.d.). Commercial Paper. Retrieved Mar 26, 2011, from Investopedia: http://www.investopedia.com/terms/c/commercialpaper.asp