credit ratings

If there is a co which has an unrestricted subsidiary, such that the subsidiary is very profitable and has been formed recently, why should the potential credit rating for the parent company go down?? I mean why is there such kind of a notching possibility?

the credit rating for parent can go down because the subsidiary is profitable ‘but’ formed recently, risk is higher for startups and companies in growth phases, subsidiary profitable now as a new startup may not be profitable or stable afterwards. so higher risk - lower rating . However, if the analysts are too optimistic about the startups future, the parent may get higher rating, but thats exceptional.

Okay. Thanks for reverting back.