The development of company’s debt portfolio

Abstract

TGoal: Although companies use actively the potentials of a debt capital market and debt financial instruments market to finance their activities, the development of company’s debt portfolio for the strategic perspective remains a relevant issue. The goal of this paper is to create a model for the development of the optimal debt portfolio aimed at implementing company’s corporate strategy. Methods. We have created an optimization model for creating company’s debt portfolio based on G. Markowitz’s portfolio theory within a framework of our research. To develop a target function, we have used the maximum contingent income from the attraction of loans. We have created a system of restrictions based on financial risks diversification. To implement the model, we have used the MS Excel environment and the packet of applied programs MathCAD Results. We have elaborated the model for creating company’s debt portfolio for the strategic perspective. We have chosen the maximization of contingent benefits of attracting loan capital from different sources of debt financing as a target criterion of the model. The model’s restrictions enable to diversify financial risks. They encompass the following terms: the achievement of the goal structure of capital, the provision of financial risks diversification in choosing the strategy for financing company’s assets; the optimization a financial leverage effect; the diversification of the risks of losing ability to pay and reducing financial stability. To analyze the possible utilization of the model, we have considered the development of the debt portfolio of a construction company, which provides the strategy for company’s development over the next 5 years. The results of the research have enabled to develop company’s optimal debt portfolio that complies with the terms of financial risks diversification and to define the optimal sources of loans at each moment of time. Conclusions. Our model for the development of company’s debt portfolio enables to model the structure of the sources of loan financing depending on the needs for loan capital at each moment of time and maximum amounts that a company may attract from each source of debt financing. Changes in the terms of granting loan capital and changes in the situation in product and financial markets may lead to structural shifts in the content of financing sources; therefore, the process of modelling the optimal structure of debt financing should be a continuous. The obtained results of modeling the structure of a debt portfolio enable a company to make more informed decisions in attracting loan financing.