debt-design
Debt design: matching debt to the assets it finances
The optimal debt ratio answers how much to borrow. This skill answers what to borrow.
The principle is matching. Debt cash flows should move with the cash flows of the assets being financed. When they match, a downturn that cuts asset value also cuts the value of the debt, and the firm never becomes technically insolvent for structural reasons. When they do not match, the firm carries default risk that has nothing to do with its business. A cyclical firm with flat payments defaults in a recession it would otherwise survive. A firm earning euros and paying dollars defaults on a currency move.
That makes design a value question, not a paperwork question. Better matching lowers default risk at any given debt level, which raises debt capacity, which raises the optimal debt ratio and firm value.