Firstly, tax deductibility is only of value when profits are earned and tax is payable. Having said that, the cost of debt (even before tax) is lower than the cost of equity. I am sure shareholders want a return well in excess of the USA current borrowing rate i.e. very low. So IMO this is good financial management. Rather they borrow against assets than have to raise capital in equity. Also tends to give shareholders further comfort because lenders will not lend against equipment unless thay are fairly comfortable that they will get repaid interest and principal. This equipment is probably relatively special so second hand value is likely to be minimal. So the lenders must be fairly sure earnings will soon be generated.
UNS Price at posting:
76.5¢ Sentiment: None Disclosure: Not Held
