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Chapter 6
1.4 International debt finance
Large companies can borrow money in foreign currencies as well as
their own domestic currency, from banks at home or abroad or by
issuing Eurobonds.
The main reason for wanting to borrow in a foreign currency is to fund a foreign
investment project or foreign subsidiary.
The foreign currency borrowing provides a hedge of the value of the project or
subsidiary.
It protects against changes in value due to currency movements. The foreign
currency borrowing can be serviced from cash flows arising from the foreign currency
investment.
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