easy · Corporate Credit Analysis
If an issuer is rated CCC, why might a senior secured bond with 100% recovery be capped at a rating of B or B-?
- Because secured debt of a CCC issuer is actually riskier than its equity.
- Because at the CCC level, all debt is legally required to recover exactly 50%.
- Because CCC companies are forbidden from having first-lien debt by the SEC.
- Because rating agencies generally limit the amount of uplift (notching) from a very low corporate rating.
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