Definition: Strip financing is corporate financing by selling "stapled" packages of securities
together that cannot be sold separately. E.g., if a firm might sell bonds
only in a package that includes a standard proportion of senior subordinated
debt, convertible debt, preferred, and common stock. A benefit is reduced
conflict. In principle bondholders and stockholders have different interests
and that can impose costs on the firm. After a strip financing, however,
those groups are each made up of all the same people, so their interests
coincide.
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