Leveraged Finance & Credit
Why do rating agencies 'notch' instrument ratings up or down from the corporate family rating across tranches?
Model answer
The corporate family rating (CFR) reflects the issuer's probability of default — which is the same for all its debt. But individual tranches differ in expected RECOVERY given default, so agencies…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 1,500+ — or go Pro for unlimited reps.
More from Leveraged Finance & Credit
- Rank a standard LBO capital structure from cheapest to most expensive cost of capital, and explain why the ordering holds.
- A sponsor buys a company at 6.0x EBITDA of $200mm ($1.2bn EV). They want 4.0x total leverage. Sketch a plausible debt stack by tranche and the equity check.
- Why would a deal include both a TLB and senior notes rather than just maxing out the term loan?
- What does 'pro-rata' vs. 'institutional' tranche mean in a leveraged loan package?
- Explain the typical amortization profile of a TLB and what a '1% amort with bullet' means for the lender.
- What is an excess cash flow (ECF) sweep, and how does the sweep percentage typically step down?