easy · Corporate Credit Analysis cap-structure
What is the primary risk for a 'Senior Unsecured' creditor when a company issues a large amount of 'Senior Secured' debt?
- Their interest rate is forced down to match the secured debt's lower rate.
- The maturity of their unsecured bonds is automatically extended by another five years.
- They are required by federal law to convert all their outstanding bonds into common equity.
- Their recovery prospects in a liquidation are diminished as assets are pledged away.
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