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A Primer on Portfolio Management Options for Parents and Captives

By Joe Nachbin
October 01, 2003

Imagine receiving a call from corporate indicating that your captive team has done a wonderful job of providing financing for your manufacturer parent organization. In fact, as a result of this excellent performance the parent company's leverage ratio is reaching the point that its financial rating may be reduced by the rating agencies. This is the type of good news/bad news call most captive managers would rather not receive.

Often corporate's response to threats to its credit rating is to sell or refinance the portfolio. In fact, in the past 9 months a number of captive managers have faced this challenge. What are a captive executive's options? How does one balance the parent's needs with the captive's and the customers'?

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