Mark which column the following characteristics will have on a credit spread for a corporate bond with
Question:
Mark which column the following characteristics will have on a credit spread for a corporate bond with an “X”:
# | *All other things constant: | Higher | Lower | Indeterminate |
1 | Debt increasing relative to profits. | |||
2 | Profitability is increasing. | |||
3 | Operates in a risky industry. | |||
4 | Has negative CFI. | |||
5 | Declining FCF. | |||
6 | Increasing share buybacks. | |||
7 | Initiates a special dividend. | |||
8 | Executive turnover. | |||
9 | Has a history of horizontal integration. | |||
10 | Issues debt to fund acquisitions. | |||
11 | Net income increase relative to RCF. | |||
12 | A new competitor with scale enters. | |||
13 | Steady low-volatility environment. | |||
14 | Lower demand for new issue supply. | |||
15 | Cash conversion cycle declines over time. | |||
16 | The firm issues subordinated debt. | |||
17 | The firm issues ‘pari’ debt. | |||
18 | Expansionary phase in the credit cycle. | |||
19 | Increased government regulations in the industry. | |||
20 | CDS spreads on the company widened. | |||
21 | Market volatility increases. | |||
22 | The firm gets acquired by a better fundamental company. | |||
23 | The Fed purchases treasuries to supply market liquidity. | |||
24 | Inflation increases. | |||
25 | Time passes. |