RE:RE:Debt to Trailing 12 Months' EBITA .... WC,
Thank you for your response, and you make a good point about the numbers that the analyst would have used as his base. Usually they take their #'s from the company, but fair point.
I should have made clear that the analyst was talking about an ADDITIONAL $2 billion beyond the asset sales that are presently underway. That is the reason I posted, because it is beyond what the company is presently working on. Basically, the company has 25 months to deal in a permanent fashion with the $3 Billion working capital bridge facility - most of which needs to be replaced with non-debt instruments. That is ON TOP OF the asset sales.
As for interest rates, well the Fed hiked today and stated their bias towards two more hikes this year and three more next year. Yes rates are still (relatively) low but the trend is now upward.
The level of leverage is an issue becuase of the debt rating agencies, whose ratings determine what coupon companies issuing debt need to give in order to sell their debt or pref. shares successfully.
5x Trailing 12 Months' EBITDA to debt is roughly the dividing line between being BBB investment grade or below. Spend too long above that and your debt quality rating gets cut - costing the company more in interest costs, which means less $$ for other things ....
So this stuff matters, particularly in a RISING INTEREST RATE environment.