chapter  5
Pages 13

Whereas equity funding is perpetual, (except in the rare cases where companies buy back and cancel some stocks) debt capital has a finite duration and must be repaid on or before maturity. A borrower has to decide the required term (maturity) for each new debt. For a major corporate borrower, debt can be of almost any duration. Walt Disney, the entertainment group, issued $300 million of bonds in July 1993 with a maturity of 100 years. Most companies, however, can arrange debt funding with maturities ranging from overnight up to ten years. The majority of companies are generally unable to raise funds for maturities over 10 years because lenders and investors are unwilling to accept the higher risk of default that is inevitable with longer-term debts.