Posts Tagged ‘derivative risk’

Bad Credit = No Hedging?

The last few years have proven to be extremely challenging for companies issuing debt. Even if a company was lucky enough to find a bank willing to underwrite an issue, the pricing was prohibitive and issuers needed a pragmatic approach. One of the practical ways to get pricing to achieve reasonable levels was to embed credit-contingent features in the deals that would trigger higher coupon payments with the expectation that credit ratings (read credit spreads) widen in the future.

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