medium · Debt Capital Markets credit-ratings-risk
Why would a private equity sponsor negotiate for 'portability' in a target company's high-yield bond issuance?
- To lower the initial coupon rate that is offered to investors at the time of the bond's pricing
- To ensure the debt is automatically upgraded to investment grade once the company's sale closes
- To convert the fixed-rate bonds into floating-rate notes immediately upon any qualifying change of control event
- To facilitate a future exit by allowing a buyer to take over the debt without triggering a refinancing.
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