BANKING ON REAL OPTIONS

Steven C. Patrick

Journal of Applied Corporate Finance, 2000, vol. 13, issue 2, pages 108-111

Abstract: This article discusses why many companies use committed bank facilities to finance their real options. The pace of change in the current economic environment has increased the value of financial flexibility. If and when companies choose to exercise their real options, they often require capital to finance these initiatives. Committed bank facilities meet this requirement by providing the assurance of funding (subject to explicit conditions), or at least a starting point for raising the new capital. 2000 Morgan Stanley.

Date: 2000
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