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Chapter 5 (part III) (Sovereign credit analysis (p.267-268) - read the…
Chapter 5 (part III)
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Special considerations of high yield, sovereign, and non- sovereign credit analysis
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high- yield analysis
projection of financial stability (income and expense side should be taken into account) - projecting future earnings and cash flows
debt structure: layers of debt with different seniority (example 10, page 260)
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covenants
Change of control put: allows the bondholders to exercise the right to require the issuer to buy back their debt (put option) => protect existing creditors from being exposed to a weaker, more indebted acquirer
Restricted payments: protect creditors by limiting how much cash can be paid out to shareholders overtime
Limitations on liens: protect unsecured creditors by limiting how much secured debt an issuer can borrow
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