What Is a Debt Instrument? A debt instrument is a tool an entity can use to raise capital. It is a documented, binding obligation that provides funds to an entity in return for a promise from the entity to repay a lender or investor in accordance with terms of a contract. Debt instrument contracts detail
What Is Debt Load? Debt load is the total amount of debt carried by an individual, government, or business. Publicly traded companies record their debt load on their balance sheets, providing investors with a snapshot of what they own and owe every quarter. Key Takeaways Debt load is the total amount of debt carried by
What Is a Debtor in Possession (DIP)? A debtor in possession (DIP) is a person or corporation that has filed for Chapter 11 bankruptcy protection but still holds property to which creditors have a legal claim under a lien or other security interest. A DIP may continue to do business using those assets. However, it
What Is Debtor-in-Possession (DIP) Financing? Debtor-in-possession (DIP) financing is a special kind of financing meant for companies that are in bankruptcy. Only companies that have filed for bankruptcy protection under Chapter 11 are allowed to access DIP financing, which usually happens at the start of a filing. DIP financing is used to facilitate the reorganization of
What Is Debt Overhang? Debt overhang refers to a debt burden so large that an entity cannot take on additional debt to finance future projects. This includes entities that are profitable enough to be able to reduce indebtedness over time. A debt overhang serves to dissuade current investment, since all earnings from new projects would
What Is Debt Restructuring Fraud? Debt restructuring fraud is an illegal technique in which an individual or corporation hides or transfers assets before filing for bankruptcy. As a result, debt restructuring allows the fraudster to reduce or even erase the debts, and then reclaim the assets after the filing goes through. Debt restructuring fraud is a clear
What Is a Debt Security? A debt security is a debt instrument that can be bought or sold between two parties and has basic terms defined, such as the notional amount (the amount borrowed), interest rate, and maturity and renewal date. Examples of debt securities include a government bond, corporate bond, certificate of deposit (CD)
What Is Debt Service? Debt service refers to the money that is required to cover the payment of interest and principal on a loan or other debt for a particular time period. The term can apply both to individual debts, such as a home mortgage or student loan, and corporate or government debt, such as
What Is Debt Signaling? Debt signaling is a financial theory that correlates a stock’s future performance with any current announcements made regarding its debt. Announcements made about a company taking on debt (e.g., by issuing new bonds) are typically seen as positive news as it can signal the company is creditworthy and is raising capital
What Is Deal Flow Deal flow is a term used by investment bankers and venture capitalists to describe the rate at which business proposals and investment pitches are being received. Rather than a rigid quantitative measure, the rate of deal flow is somewhat qualitative and is meant to indicate whether business is good or bad.
