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Chapter 10. Beyond Their Means: Balance ... > Red Flag 3: Rating Agencies Cut a Co...

Red Flag 3: Rating Agencies Cut a Company’s Long-Term Debt to Junk Status

This is just about the biggest flag of them all. Likely results of junk status include sharply higher borrowing costs, loss of some investors, a probable drop in the share price to go with a decline in the company’s bond prices, and (particularly if it is the latest in a series of downgrades) concerns expressed in the media and elsewhere that the company faces a troubled future, and could even be heading for bankruptcy.


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