The factor considered by rating agencies when a corporation has debt at both its parent holding company and operating subsidiaries is best referred to as:
A) credit migration risk.
B) corporate family rating.
C) structural subordination.

Question

Quizplus · Accepted Answer

Structural subordination is the factor considered by rating agencies when a corporation has debt at both its parent holding company and operating subsidiaries. This means that in the event of bankruptcy or default, the obligations of the subsidiaries are subordinate to those of the parent holding company. This is an important consideration for credit rating agencies when assessing the overall creditworthiness of a corporation. Credit migration risk refers to the risk that a borrower's credit rating may change over time, while a corporate family rating is a measure of the creditworthiness of a group of companies under common ownership or control.

The Factor Considered by Rating Agencies When a Corporation Has