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Sagot :
The given statement, if Sixty Second Avenue inc. (ssa) decides to deleverage in the future, the total number of shares outstanding will keep decreasing until creditors own 100% of the company, is false.
What brings about deleveraging?
Deleveraging typically takes place following a market downturn and is therefore motivated by the need to cover losses, which can deplete capital, create a less risky profile, or is necessary by anxious lenders to avert default.
How can value arise from deleveraging?
Deleveraging refers specifically to the repayment of debt owed to lenders. Deleveraging, however, adds value by lowering the transaction's initial leverage, but this strategy necessitates that the portfolio firm produce consistent cash flows (i.e. be non-cyclical and non-seasonal).
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