Capital Markets (ECM / DCM)
A company is downgraded from BBB- to BB+. Walk me through the consequences for its bonds and funding.
Model answer
This is a 'fallen angel' — it crosses from IG into HY. Consequences: (1) Forced selling — IG-only mandates and IG index funds must sell, and the bonds drop out of IG indices into HY indices, creating…
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