Asset-Light Debt


DEFINITION of 'Asset-Light Debt'

A corporate debt that has less than the usual amount of collateral, which is normally 30% or more of the company's value. With asset-light debt, that number is much lower, with many companies' collateralized debt percentage falling far below the previous standards. It can sometimes even be at zero.

BREAKING DOWN 'Asset-Light Debt'

A company may use this strategy by creating a a holding company. The company would then use the holding company to issue debt and pay off the debt through dividends from the original company.

  1. Holding Company

    A parent corporation that owns enough voting stock in another ...
  2. Collateralized Debt Obligation ...

    An investment-grade security backed by a pool of bonds, loans ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  5. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
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  3. How do dividends affect the balance sheet?

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