medium · Debt Capital Markets bond-instruments-structures
In a 'structural subordination' scenario, a holding company (HoldCo) issues debt, but all the firm's assets and cash flows are at the operating subsidiary (OpCo).
How does this affect the HoldCo debt rating?
- HoldCo debt is notched up to reflect parent-level oversight
- HoldCo debt is rated based on its own separate default probability
- HoldCo debt is notched down from the OpCo debt rating
- Both HoldCo and OpCo debt receive the same rating
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