UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Next Thread
Author: folgore Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35392  
Subject: Bond vs stock ratings? Date: 1/14/2012 7:30 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
I have two bond positions in Edison Mission Energy (EME) in my Etrade account. It's rated B- by S&P and Caa1 by Moody's. According to the bond entry for EME in Etrade, EME's parent company is Edison International which trades under EIX on the stock exchange. Looking at the S&P report for EIX, however, S&P rates them BBB- versus B- for the Edison Mission Energy bond. Why the difference? Does that mean that if Edison Mission Energy has problems, EIX won't pay off bondholders? I didn't think that was possible.
Print the post Back To Top
Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33588 of 35392
Subject: Re: Bond vs stock ratings? Date: 1/15/2012 12:42 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 2
Get hold of the prospectus for the EME bond issue and read it carefully. You will probably find that the EME bond is supported by specific assets, and not by the full faith and credit of EIX. Or at least that other liabilities have higher claim on whatever assets.

Bond rating agencies are experts at creating the ratings. A rating of less than investment grade indicates they could not find assets to refund the bond. Getting repaid at maturity depends either on the success of the business venture the funds were invested in or the ability of the company to get new financing when the bond comes due.

Most would trust the rating agencies.

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Next Thread
Advertisement