hard · Corporate Credit Analysis

If an issuer has a builder basket with a 50% CNI multiplier, what happens if CNI is negative for the *entire* period since the reference date (e.g., -$100 million)?

1. The builder component adds $0 million, but the -$100 million may reduce other building blocks like the starter basket.
2. The issuer must contribute $100 million in equity to 'reset' the basket.
3. The negative CNI is ignored and the basket stays at the 'Starter' level.
4. The builder component adds -$50 million to the pool.

Sign up free to see the explanation and track your rank →