Question

D-3

Conduct research and discuss the Bond Market.

Find a company for which Moody's and/or Standard and Poor's has recently changed the credit rating (either good or bad). Provide details on why the rating was changed. What happened to the company's stock price when the rating was changed?

Answer 1

A company for which recently the bond ratings has been changed is State Bank of India.

State Bank of India is an Indian company who is the major nationalised bank in India and when the Modi has downgraded the ratings of entire India to BB-underperformer, it has also downgraded the major nationalised bank of the country which is State Bank of India's bonds, to higher level investment grade bonds to lower level investment grade bonds which is attributed as BBB.

Due to the downgradation of the ratings of The Bonds, there would be a reaction on the way down side as the stock prices are not taking it positively as there is a negative future outlook on the part of the company and it will mean that the recovery rates on its bonds is also lower and the principal payments are also subject to risks and downgradation. ItIcould also mean that the company is deteriorating.

The rating was changed due to micro as well as macro environment because of physical shutdown of businesses and lack of credit growth in the banking industry as well as lack of positive Outlook.