Holdean Property Development Ltd. has been downgraded to a BB rating (below investment grade) by the major debt rating agencies. What is the immediate consequence of the reclassification?

Question

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The immediate consequence of the downgrade is that current bond holders are experiencing a decline in the value of the company's bonds, as the lower credit rating indicates a higher risk of default. This means that investors may demand a higher yield to compensate for the increased risk. Shareholders may still demand a higher dividend payout or the company may have a higher weighted average cost of capital, but these are not the immediate consequences of the reclassification. Option E is also incorrect as banks and financial institutions stepping in to restructure debt requires a legal process and is not an immediate consequence. Option C is incorrect as current bond holders may require a higher coupon payment, but it is not a guarantee.