junk financing

Junk Financing

The act of financing an activity or broader operations through the issue of junk bonds. These bonds have low credit ratings and are comparatively high risk. As a result, the issuer must pay higher interest rates. Junk financing is used in some takeover situations where the acquiring company is cash poor.
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junk financing

The raising of funds by issuing unsecured high-yield securities, for example, during takeover attempts in which the acquiring firm has little cash and must issue unsecured debt to finance the acquisition. Also called high-yield financing.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.