Which one of the following statements is correct concerning the issuance of long-term debt?
A) A direct private long-term loan has to be registered with the SEC.
B) Direct placement debt tends to have more restrictive covenants than publicly issued debt.
C) Distribution costs are lower for public debt than for private debt.
D) It is easier to renegotiate public debt than private debt.
E) Wealthy individuals tend to dominate the private debt market.

Question

Quizplus · Accepted Answer

Direct placement debt often comes with more restrictive covenants than publicly issued debt because the lenders (often institutional investors) seek to closely monitor and control the risk associated with their investment. Publicly issued debt, on the other hand, is sold in the securities markets to a broad base of investors and typically involves less direct oversight by any single creditor.

Which One of the Following Statements Is Correct Concerning the Issuance