medium · Debt Capital Markets credit-ratings-risk
What happens to the price of a bond in the secondary market if a change of control is announced and the company is expected to fail its portability test?
- The price falls sharply because of the uncertainty about the new controlling owner.
- The price will rise toward the make-whole premium to reflect the increased credit risk to holders.
- The price stays unchanged because the bond carries a fixed contractual coupon to maturity.
- The price will gravitate toward 101%, especially if it was trading at a deep discount.
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