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ARCHIVE | Criteria | Corporates | General: Issuing Equity Hybrids Via A Corporate Issuer's Operating Subsidiaries Jul 07
Standard & Poors, July 2007
Abstract
Many companies structure their operating units as distinct legal entities, owned, controlled, and consolidated by the parent company. (This is especially the case in the utility business, where the operating subsidiaries are regulated entities. It is also the case for financial institutions, but this article relates only to corporate issuers.) If such operating subsidiaries issue equity hybrids, the rating benefit extends to the parent company and the larger consolidated entity--inasmuch as Standard & Poor's Ratings Services' analysis focuses on the consolidated economic entity. Issuance at the subsidiary level does pose some questions regarding how the equity aspects help parent company creditors. In particular, the lack of subordination and the potential for trapping funds at the subsidiary are two concerns that...
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
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