How Does Bending Spoons Use Debt Without Risking the Company?

Luca Ferrari says debt lets Bending Spoons do more sooner, and it is smart when the expected return beats the cost of the debt and the chance of default stays negligible. If that chance becomes significant, the extra risk stops being an easy yes. Companies that later went bust would have sounded bullish about their debt beforehand. Bending Spoons has not come close to trouble, and he still treats that as a reason to stay paranoid.

The limits they set keep leverage well below 3 times. It is about 2.4 to 2.5, and historically closer to 2 than to 3. They want to be able to repay 100 percent of the debt before maturity even in a severely bad scenario. Most of the debt is refinanced every year or two so maturity stays five or more years out, and 100 percent of it is hedged against interest-rate moves. His current view is that the risk of default is close to zero, so they are better off with the debt than without it. Someone who does not understand the cash-flow consequences should start small. A project that could become huge may take a decade or more, and taking two or three extra years with little risk beats speeding up and crashing.