Dividends reduce the value of lender claims, and this is why bondholders often limit the company's ability to distribute cash to equity holders.

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Dividends reduce the value of lender claims, as they are paid out to equity holders before any remaining cash is used to repay bondholders. This is why bondholders often limit the amount of cash that a company can distribute to equity holders, in order to protect their own interests and ensure that they are repaid in full.

Dividends Reduce the Value of Lender Claims, and This Is