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Waiuta
11-11-2010, 08:28 AM
It seems there are so many descriptions for debt instruments, ie senior, subordinated, unsubordinated, deeply subordinated, callable etc.
Is anyone aware of a chart which has a corelation between a debt instrument and a credit rating?

Enumerate
11-11-2010, 09:53 AM
Is anyone aware of a chart which has a corelation between a debt instrument and a credit rating?

There is no automatic association between debt subordination and credit rating.

Babcock & Brown is a very interesting case in point. There are actually better prospects for some recovery on the subordinated B&B notes compared with Bank secured debt! This is due to the play out of the legal scenarios.

As always, for NZ debt ... the Companies Office ... www.companies.govt.nz ... is your friend. They hold copies, in electronic downloadable form, of key Trust Deeds and Prospectii.

Beagle
11-11-2010, 05:08 PM
There is no automatic association between debt subordination and credit rating.

Babcock & Brown is a very interesting case in point. There are actually better prospects for some recovery on the subordinated B&B notes compared with Bank secured debt! This is due to the play out of the legal scenarios..

SCF pref shares had huge potential for value recovery when they were 15 cents too......do yourself a favour mate, you want huge potential, buy some Pan Aust shares - code PNA.

Dubdee
16-11-2010, 01:44 PM
There is only the rule that subordinated should trade at yields between an orgainsations senior debt and ordinary equity and that the credit ratig of the senior debt given it has the first priority in payment duing insolvency should be rated the highest. Typically bank sub debt dependent on fom should have lower cedit ratings and higher yeild than senior bank debt. Typically the ratings spreads are 1 -2 rating notches.

Waiuta
16-11-2010, 06:12 PM
Thanks for all the replies