Why do companies issue Floating Rate instruments?

Answer 1

During times when cash is hard to raise for business expansion purposes, the market interest rates are usually high. Though this is not a permanent situation, if a company offers a fixed rate bond at the prevailing rate, it would have to continue to make the payments until the bond maturity. There are chances that the situation may improve and market interest rates come down. In such cases, companies that raised money at higher rates a few years/months back are going to lose a lot of money.

Floating rate notes are an easy alternative wherein, the payments made out to investors are going to be in line the prevailing market interest rates.

Companies that need cash and predict the market rates to fall usually issue FRNs