What happens when the bond ratings get adjusted downwards?

When bond ratings are adjusted downwards, it typically signifies an increased perception of risk associated with the issuer's ability to meet its debt obligations. This downgrade can lead to higher borrowing costs for the issuer, as investors demand a higher yield to compensate for the increased risk. Additionally, it may trigger selling by institutional investors required to hold only investment-grade bonds, further impacting the bond's market price and liquidity. Overall, a downgrade can negatively affect the issuer's financial stability and market reputation.