easy · Debt Capital Markets credit-ratings-risk
What is the primary risk for a 'crossover' issuer that loses its final Investment Grade rating and becomes High Yield?
- The issuer is legally required to shut down its operations and liquidate its assets immediately.
- Forced selling by institutional investors, which can lead to a sharp widening of its credit spread.
- The issuer must pay back all of its debt in cash within forty-eight hours.
- The company's board of directors is replaced by the rating agency's analyst team.
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