Bank debt priority boosts firm value by 10%, mitigates bankruptcy risk.
The article explores how different types of debt and their priority affect a company's financial decisions. Bank debt that can be renegotiated during tough times helps firms avoid bankruptcy costs. Bank debt issuance reduces bankruptcy risk and speeds up investments, helping to overcome debt overhang. Having a mix of bank and market debt boosts a company's value by 5%-10% compared to using only one type of debt. It's best to prioritize bank debt for maximum value.