Then how about normal interest-bearing debt? The definition says “changing the company capital structure by increasing debt will not impact FCFF, although it will initially increase FCFE by the amount of debt issued and then reduce FCFE thereafter by the after-tax interest expense”.
Even if interest expense is increased, there is no effect on FCFF.
Note the formula:
FCFF = NI + Dep + Int(1 – tax) – FCInv – WCInv
If interest expense increases, then net income decreases by Int(1 – tax); when we add back Int(1 – tax), it cancels. There is no interest effect on FCFF.