Hi All,
Not sure if this is the correct place to post this, but would love to hear some ideas on this.
I am performing a synthetic credit rating on a company, and need to figure out a way to decrease there credit rating (ie to achieve a higher interest rate) for a loan this company is receiving. (intercompany loan).
Has anyone got any ideas on how to achieve this, without fiddling with the balance sheet/profit loss statement.
Ideas such as other synthetic instruments or something that could lead to a dcreased credit rating. Or terms that could be build into the loan that would increase the interest rate??
Thanks in advance.
Ah, transfer pricing. Gotta love that integrity. Here are some words you can use to justify your increased rate: Illiquidity premium-can't offload an I/C loan, so it'd be more expensive than a syndicated loan of the same rating
Size premium-see above
Country risk/unhedged forex risk premium-if the borrower is in a foreign country
Structural Subordination premium-if the company would need to pay key suppliers first in the event of a bankruptcy
Liquidation premium-the asset coverage ratio is actually lower than the B/S data would suggest because of difficulties in monetizing.
Great tips thanks kenny.
But how does one come up with numbers for these premiums to add to the benchmark?
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