How corporate growth affects the choice between relationship-based debt and public debt remains an unsettled issue in the literature. For high-growth firms, the banking relationship mitigates asset-substitution and underinvestment problems due to debt financing. Close relationships, however, work against funding competition and facilitate holdup behavior by banks. This paper suggests an effective mechanism for high-growth firms, namely competition from equity, to curb banks’ rent extraction when public debt becomes more costly. According to the generalized Myers-Majluf view in the recent literature, new equity issues by high-growth firms actually reduce or even reverse the adverse-selection discount because asymmetric information about these firms’ valuations arise largely from growth rather than from assets-in-place. Our evidence from Japanese data for 1983 to 1997 shows that the relation between loan-to-debt ratio and growth, initially significantly negative, is indeed reversed toward the high end of growth spectrum and turns significantly positive. Consistent with our explanation, fast-growing high-flyers raise more new equity than do other firms. These results not only confirm the existence of both costs and benefits of monitored debt, but also explain why high-growth firms enjoy the benefits without fearing holdup behavior by banks.