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Asset substitution

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Asset substitution
Occurs when a firm invests in assets that are riskier than those that the debtholders expected.

Asset substitution
A company's exchange of lower-risk investments for higher-risk investments. Firms may use asset substitution as a form of financing, or as a move to please shareholders. It can be detrimental to the company's bondholders as it increases the possibility of default without any corresponding benefit because bonds have a fixed interest rate. On the other hand, asset substitution can benefit shareholders as it carries the possibility of higher returns.


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The new Asset Substitution Product gives qualified borrowers a unique advantage.
6330(c)(2)(A), the taxpayer may raise any relevant collection issues at the Appeals hearing, including the propriety of the IRS's intended collection action, spousal defenses and possible alternatives (including asset substitution, an installment agreement or an offer in compromise).
Asset substitution will occur during the revolving period, which is expected to end in October 2009.
 
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