I was reading about the debt to equity ratio on Investopedia and in third paragraph under the "Modifications to the Debt-to-Equity (D/E) Ratio" title, it says that:
"If interest rates fall, long-term debt will need to be refinanced, which can further increase costs. Rising interest rates would seem to favor the company with more long-term debt"
This seems very contradictory to me? Shouldn't this be the opposite instead? Rising interest rates would mean that debt capital cost more as the company needs to pay higher interest on its outstanding debt?
Follow up question: Can someone also explain
"If interest rates fall, long-term debt will need to be refinanced, which can further increase costs."
why does the existing long term debt needs to be refinance? What qualifies as a long term debt?