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Given the risk factors, Lou Schizas advises caution when considering People Corp.
Given the risk factors, Lou Schizas advises caution when considering People Corp.
(michele piacquadio/Getty Images/iStockphoto)

Who’ll buy Constellation’s risky debt? Shareholders

If you’re a company issuing debt, you want two things. First, you want to limit your interest payments on the debt. While interest can be deducted against taxable income, interest is also an expense that requires cash flow, and it’s something that increases the riskiness of a company. Second, you want freedom to run your business the way you think is best. Debt covenants put constraints on a company’s ability to freely operate. In an ideal world, you’d issue low interest debt that is light on covenants.