CFA Level I · CFA Level I Exam · Credit Analysis for Corporate Issuers
In analyzing a high-yield issuer, an analyst notes that the company has a large amount of debt maturing in 18 months and limited undrawn credit lines. This situation is best described as a concern about:
This is best described as refinancing risk. With a large maturity approaching and few undrawn credit lines, the issuer depends on capital markets to roll over its debt, and if markets are closed or terms deteriorate, it may struggle to repay and could default.
- Arecovery rate on secured assets
- Brefinancing riskCorrect
- Ccovenant incurrence tests
Explanation
Large near-term maturities combined with weak liquidity sources mean the issuer may be unable to roll over debt on acceptable terms. That is refinancing risk. Recovery rate concerns loss after default, not the ability to roll over debt.
Did you get it right without looking?
One question tells you little. A timed set on Credit Analysis for Corporate Issuers shows your real accuracy, how long you take and where you lose marks.
More Credit Analysis for Corporate Issuers questions
- An analyst evaluating a corporate issuer's creditworthiness wants a coverage measure that captures the issuer's ability to meet interest obl…
- Company X reports EBITDA of 600 million, interest expense of 100 million and total debt of 1,800 million. Its debt-to-EBITDA ratio and EBITD…
- A bond has a face value of 1,000. In default, the bondholders are expected to recover 380 per bond. The loss given default as a percentage o…
- Two issuers have identical EBITDA. Issuer X leases most of its equipment under IFRS 16 leases recognized on the balance sheet, while Issuer …
- An analyst reviews a high-yield issuer's capital structure with secured bank debt, senior unsecured notes and subordinated notes. In a bankr…
- Two issuers in the same industry have equal EBITDA. Issuer X has a lower ratio of retained cash flow to net debt than Issuer Y. All else equ…