CFF - issuing stock to retire bond

CFA Level I
#1

Hi,

Why is the issuance of stock to retire debt non-cash? IMO that is false. Issuing stock brings cash proceeds for the company which then pays down debtholders.

One of the Qbank questions states that retiring a bond by issuing stock does not involve cash.

Thanks

#2

They’re probably thinking of simply issuing the stock to the bondholders in exchange for the bonds; no cash changes hands.

Even if cash did change hands, they’d be offsetting CFF cash flows: one an inflow, the other an outflow. The net effect on CFF is zero.