medium · Debt Capital Markets bond-instruments-structures
An issuer has two bonds outstanding: a Senior Secured bond at the Operating Company (OpCo) and a Senior Secured bond at the Holding Company (HoldCo). The HoldCo bond is secured by the equity of the OpCo.
In a liquidation, why is the OpCo bond considered senior to the HoldCo bond?
- The OpCo bond simply carries a materially higher credit rating from each of the three major rating agencies involved.
- The OpCo bond has a direct claim on the physical assets, while the HoldCo bond has a claim only on residual equity value.
- The HoldCo bond is contractually subordinated to the OpCo bond through the terms of a binding intercreditor agreement.
- HoldCo bonds are always legally required to be issued on a fully unsecured basis under the global Basel III capital framework rules.
Sign up free to see the explanation and track your rank →
More Debt Capital Markets bond-instruments-structures practice
- What does a 5-year bond described as 'NC2' signify regarding its call protection?
- Which of the following describes a 'step-up' coupon in a callable bond?
- Which type of investor is a 'natural buyer' of floating-rate notes due to their need to ma
- A 102 call premium is equivalent to paying:
- If a bond is 'callable at par,' what is the issuer's redemption cost per $1,000 of face va
- What is a 'call schedule' for a corporate bond?
- What is meant by the term 'compounding in arrears' for a SOFR-based floating-rate note?
- What is a 'deferred call'?