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calvinbhai | 5 years ago

Trying to wrap my head around this.

Is this different from Convertible Debt?

Also, why raise at 10% interest when interest rates are so low?

discuss

ceejayoz|5 years ago

> Also, why raise at 10% interest when interest rates are so low?

Interest rates on a house reflect the fact that the bank can repossess it if you stop paying.

AirBnB's higher interest rate reflects the chance that there'll be nothing left.

safog|5 years ago

Corporate bond yields spiked due to business risks posed by Covid19. B rated bonds went from ~5% to >10.65%

knes|5 years ago

a preferred Payment In Kind (PIK) is not the same as a high yield bond.

PIK is closer to equity so a 10% interest is pretty high

rchaud|5 years ago

> Also, why raise at 10% interest when interest rates are so low?

There's an old proverb in finance that goes:

"If you borrow a million and can't pay it back, you're in trouble.

If you borrow a billion and can't pay it back, the bank's in trouble."

There was no way Airbnb was going to get that kind of cash at anywhere near 'market rates'.

seemslegit|5 years ago

Interests rate are low for low-risk borrowers, Airbnb isn't one.