Refinancing risk
Also called: rollover risk, maturity profile
The danger that loans fall due when lenders are unwilling to lend again, or will only do so at much higher rates.
Many companies replace maturing loans with new ones rather than repaying them from earnings. A large share of debt due within a year, short-term borrowing funding long-term assets, and floating rates all raise refinancing risk. The borrowings note shows when loans mature.
Learn more in these lessons
- Interest coverageHow can you tell whether a company can afford its interest payments?
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