Remarketing Agreement Corporate Action: What You Need to Know
Remarketing agreement corporate action is a tool used by corporations to restructure their debt obligations. It involves converting existing debt securities into new ones with different terms, such as a lower interest rate or longer maturity date.
The goal of a remarketing agreement is to make the debt more attractive to investors, which can lower the cost of borrowing for the corporation. This can be especially beneficial for companies that are struggling financially and need to refinance their debt.
There are two main types of remarketing agreements: auction rate and putable. An auction rate remarketing agreement allows investors to buy and sell the debt securities at periodic auctions, while a putable remarketing agreement gives investors the option to sell the securities back to the corporation at a specified price.
Remarketing agreements can be complex and require careful consideration by both the corporation and its investors. It’s important to understand the terms and risks involved before making any decisions.
One potential risk of remarketing agreements is the potential for failed auctions, which can lead to higher interest rates for the corporation. If investors are unwilling to buy the debt at the auction, the corporation may be forced to pay a higher interest rate to attract buyers.
Another risk is the potential for credit rating downgrades. If a corporation’s financial situation deteriorates, it could lead to a credit rating downgrade. This could cause investors to lose confidence in the company and make it harder for the corporation to borrow money in the future.
Overall, remarketing agreement corporate action can be a useful tool for corporations looking to restructure their debt obligations. However, it’s important to understand the risks involved and carefully consider all options before making any decisions.
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