Could someone please explain the term "structural subordination" ?
Any thoughts on the impact of Moody's ratings cut ,and that the outlook on both ratings is negative?
From Business Spectator, staff reporter from AAP
"Ratings Cut
Moody's has cut its senior secured rating's for BBI to Ba2 from Baa3 due to concerns about the fund's liquidity position.
The rating's agency has also assigned a Ba1 corporate family rating to BBI, reflecting the group's ability to honour its financial obligations "as if it had a single class of debt and a single consolidated legal entity structure".
The senior secured rating is notched down from the corporate family rating reflecting structural subordination, said Moody's.
The outlook on both ratings is negative.
"The downgrade of BBI's senior secured ratings reflects Moody's view that the company's credit profile is no longer consistent with an investment-grade rating given its continued liquidity challenges ," Moody's senior analyst Clement Chong said.
"Further weighting in on the rating agency's decision is the company's weak financial profile, which has primarily resulted from its aggressive debt-funded growth," Ms Chong said.
Moody's said BBI's liquidity profile remained challenging notwithstanding an anticipated reduction in equity distributions announced by the company.
Moody's said BBI faced some refinancing risk in the first quarter of calendar 2009, noting the company's intention to pay down debt through planned asset sale. "
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