medium · Corporate Credit Analysis ratings
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 issued by a CCC company is actually riskier to hold than its equity.
- Because at the CCC level, every debt tranche is legally required to recover exactly half its value.
- Because CCC-rated companies are barred by federal securities regulators from ever issuing first-lien secured debt.
- Because rating agencies generally limit the amount of uplift (notching) from a very low corporate rating.
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