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A Look Into Bunge's Debt

Over the past three months, shares of Bunge (NYSE:BG) increased by 13.99%. Before we understand the importance of debt, let us look at how much debt Bunge has.

Bunge’s Debt

Based on Bunge’s balance sheet as of October 27, 2021, long-term debt is at $4.81 billion and current debt is at $1.66 billion, amounting to $6.47 billion in total debt. Adjusted for $1.03 billion in cash-equivalents, the company’s net debt is at $5.44 billion.

Let’s define some of the terms we used in the paragraph above. Current debt is the portion of a company’s debt which is due within 1 year, while long-term debt is the portion due in more than 1 year. Cash equivalents include cash and any liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.

Shareholders look at the debt-ratio to understand how much financial leverage a company has. Bunge has $24.11 billion in total assets, therefore making the debt-ratio 0.27. Generally speaking, a debt-ratio more than one means that a large portion of debt is funded by assets. As the debt-ratio increases, so the does the risk of defaulting on loans, if interest rates were to increase. Different industries have different thresholds of tolerance for debt-ratios. A debt ratio of 25% might be higher for one industry and normal for another.

Why Debt Is Important

Besides equity, debt is an important factor in the capital structure of a company, and contributes to its growth. Due to its lower financing cost compared to equity, it becomes an attractive option for executives trying to raise capital.

However, due to interest-payment obligations, cash-flow of a company can be impacted. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.

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A Look Into Bunge's Debt

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