easy · Debt Capital Markets primary-issuance-syndication
Why would a bank *refuse* to do a 'bought deal' and insist on 'best-efforts' for a company with a 'Caa1' rating in a recession?
- The SEC strictly forbids any bank from underwriting a bought deal for an issuer rated below B in a downturn.
- The risk of a 'failed' syndication is too high, and the bank does not want to be stuck with risky debt it cannot sell.
- The bank simply wants to guarantee that the issuer ends up paying the lowest possible underwriting fee on this trade.
- Best-efforts mandates are widely considered far more prestigious for the bank's brand and overall league-table standing right now.
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