Arises in a holding company structure when the debt of operating subsidiaries is serviced by the cash flow and assets of the subsidiaries before funds can be passed to the holding company to service debt at the parent level.
Ratings agencies may notch down the parent company’s bonds based on this.
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Are you a CFA Level I candidate, or someone who is exploring taking the CFA exam? Four years ago, I was in your shoes. I am a Computer Engineering graduate and have been working as an engineer all my life. Having developed a keen interest in finance, I decided on a career switch to the finance field and enrolled into the CFA program at the same time.
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