hard · Corporate Credit Analysis credit-metrics

Holding EBITDA, FCF-before-debt-service, and refinancing markets constant, which consideration most directly undercuts the simplistic 'amortizing is always safer' conclusion?

1. Mandatory amortization is a fixed claim on cash that is senior to discretionary uses, so in a downside scenario where FCF falls, Issuer B faces a near-term liquidity/default risk that the bullet structure defers, making B's default probability potentially higher despite faster nominal deleveraging
2. Because Issuer B repays scheduled principal, its weighted-average cost of debt declines each year as the balance shrinks, so its interest coverage ratio mechanically improves relative to Issuer A, which the analyst cites as proof amortization dominates on every relevant credit metric here
3. The bullet structure forces Issuer A to carry a full balloon refinancing obligation in Year 7, and the analyst treats that single concentrated repayment event as always more severe than any interim amortization burden Issuer B faces, concluding Issuer A is unambiguously the weaker of the two credits
4. Straight-line amortization shortens the loan's effective duration and therefore reduces its mark-to-market price sensitivity to interest-rate moves, which the analyst claims mechanically lowers the issuer's probability of default by reducing volatility in the market-implied value of the whole enterprise

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