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The "Protestant" words will be in blue.
* * * * *
Nona the Non-Denominational Protestant: I don't get it, Peter, why Catholics keep putting up with the same old empty form prayers and rituals every Sunday at Mass. Don't you ever have the desire to grow in the Lord, and feel God's presence and praise Him exuberantly?
Peter the "Papist": How do you know that all Catholics don't "feel" anything, or desire to grow? That seems pretty judgmental to me. Sure, many Catholics are nominal and spiritually cold, but we don't have a monopoly on that characteristic, not by a long shot!
Nona: I can say that because the Mass is just vain repetition, which Jesus condemned in Matthew 6:7. Since it isn't spontaneous, it can't be from the Holy Spirit, but merely a dead tradition of men. It's not alive and spiritual, like our service. We're on fire.
Peter: I think that you make a lot of unwarranted conclusions. First of all, repetition in and of itself isn't always a bad thing. You overlook the fact that Jesus says vain repetition. Vain (Gk., battalogeo in Matthew 6:7) means "to repeat idly, or "meaningless and mechanically-repeated phrases," as in pagan (not Jewish) modes of prayer. So the Lord is condemning prayers uttered without the proper reverence or respect for God. As usual, He is concerned with the inner dispositions of the worshiper (see, for example, Isaiah 1:11-15, Matthew 7:20-23, 15:9), not with outward appearance, as you seem to emphasize. God sees the heart. Besides, if repetition itself were wrong, Protestants are as guilty of it as we are. Lutherans, Anglicans and Methodists are just as liturgical as Catholics, with Presbyterians not far behind. All have form prayers and creeds, such as the Nicene Creed, which are repeated every Sunday. Even the Baptists have a set routine they stick to.
Nona: Don't lump me in with them; I'm a non-denominational Christian. I'm not a "Protestant." That's just a label and tradition of men. I go by the Bible alone.
Peter: Evangelical Protestants are always saying that they're merely following the Bible's clear teaching, but that's a whole 'nother subject. Anyway, pentecostal, charismatic, "Spirit-filled" services are just as repetitious as more liturgical, ordered churches. Your position amounts to a plain old prejudice against written, traditional prayer. This proves too much, since the Lord's Prayer, and many of the Psalms would become vain repetition as well; for example, in Psalm 136, the same exact phrase is repeated for 26 straight verses! Since Scripture is "God-breathed," if you're correct this would mean that God Himself indulged in the very practice which He condemns elsewhere.
Nona: Well, I guess you've got a point there, but I still say that our services are more on fire since they're led by the spontaneous leading of the Spirit.
Peter: Having participated in both types of worship, I can tell you that your services -- edifying as they may be -- have just as much form and repetition, consciously or not, as anyone's. The music and prayer portions always seem to last the same amount of time, and then comes prophecy, the collection, a 45-minute sermon, and so on. The praises almost invariably are "Praise you Jesus," "Hallelujah," "Glory to you Lord," over and over. The prophecies vary little. I heard a "prophecy" on two occasions at my church where a person blurted out, "I am the alfalfa and the Omega" (see Revelation 1:8,11)* [laughs]. If Catholic worship is supposedly so "dead," I could say that informal worship can be excessively emotional and sometimes downright silly -- not always "spiritual." No Christian group is above criticism, or unable to benefit from others in many ways.
[* Actual experience of the author, who was a "non-denominational," charismatic evangelical Protestant.]
Nona: You know, I've never thought about all this in the way you have. But I've been on both sides, too. When I was Catholic, I used to get so bored at Mass. I wasn't convicted or challenged. It was so dry and meaningless, and the homilies left much to be desired. I never heard the gospel till I got saved 12 years ago.
Peter: I don't know how you could never get challenged or not hear the gospel. At every Mass there are four lengthy Bible readings from the Old Testament, the Psalms, the Gospels, and the Epistles -- far more than at Protestant services. Sure, the homilies aren't generally as interesting and "meaty" (in a certain sense) as Protestant ones. I admit that you guys win hands down today when it comes to fiery, stirring oratory, but as an adult, you can easily read all the theology and sermons you want. The potential for learning is unlimited. For example, if you want great preaching and food for thought from Catholics, I suggest you read the sermons of St. Augustine, or St. John Chrysostom, or John Henry Newman. Evangelicals love to read Scripture; they could benefit by reading the works of great Christians of the past also. There is a long, fabulous Christian heritage just waiting to be discovered by each Christian.
Nona: Perhaps you're right about that, but isn't the purpose of going to church to get fed and to gear up for the following week, with all its problems and stress? I need to be exhorted and encouraged.
Peter: Those aspects are valid, but I would say with all due respect, that being "fed" is for spiritual babes (1 Corinthians 3:1-2, Hebrews 5:12-14). The rest of us can feed ourselves. The Mass requires some work and active participation, as Vatican II stresses. The word liturgy means work of the people. The informed, committed Catholic doesn't go to church primarily to "feel good," "get fed," or to "get moral support," but to engage in the work of worshiping God with his whole being, including the mind (Luke 10:27), and to receive Him in communion. Even if one doesn't "feel" anything, it is worthwhile to be obedient to God and worship Him simply for Who he is.
Nona: I-um . . . maybe I've been too harsh on Catholics, and judgmental. I suppose Mass wasn't all bad all the time. Perhaps I was uninformed and lax, and didn't make enough effort to learn its true meaning.
Peter: You know, Nona, there are charismatic Masses which combine both traditional and contemporary worship, kind of "the best of both worlds." They're usually a little more spontaneous, and have more lively worship singing (I admit, Catholics generally sing terribly or not at all!). Yet, the structure of the Mass and liturgy is respected and not violated. You might like the homilies a little better, too.
Nona: I have to admit you've really challenged me to examine some of my positions. I'll have to think about this some more. Thanks, and let's discuss this again.


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subset: commoncrawl


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CARSON CITY, Nev. (AP) — Members of the Nevada Assembly are considering making it illegal for employers to request private access to most current and prospective employees' online accounts and credit history reports.
Democratic Assemblyman David Bobzien of Reno presented AB181 to the Assembly Commerce and Labor Committee on Friday.
The bill prohibits employers from requesting the username and password for a host of personal social media accounts employees or applicants may have. It also disallows employers from making promotion or hiring decisions based on a person's refusal to cede their information.
Supporters say accessing the private part of someone's account could reveal information that is illegal for employers to request under current employment laws.
Bobzien notes that the bill does not restrict the public portion of any accounts from employment or promotion consideration.
©2013 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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Best of TomDispatch: Ernest Callenbach, Last Words to an America in Decline
Posted by Tom Engelhardt at 4:19pm, August 25, 2013.
[Note for TomDispatch Readers: Every now and then, something truly out of the ordinary comes your way. In my case at TomDispatch, it was words from a dead man — not figuratively speaking, but literally — and they arrived in my email in the spring of 2012. That man, who died of cancer in April 2012, had had a way of peering into the future with a striking sense of what might lie ahead of us. Knowing he would die, Ernest ("Chick") Callenbach, the author of, among other works, the groundbreaking utopian novel Ecotopia, looked into his and our past, assessed our present, focusing on our strengths and weaknesses, and peered for a final time into the unknown, into a future he would never experience. I published his "Epistle to the Ecotopians" that May and today, as the second "best of TomDispatch" post for a waning August 2013, I offer it once again, including my introduction of that moment. It's a piece that, to my mind, like a fine wine, has aged well. Tom]
Thirty-five years later, it was still on my bookshelf in a little section on utopias (as well it should have been, being a modern classic). A friend had written his name inside the cover and even dated it: August 1976, the month I returned to New York City from years of R&R on the West Coast. Whether I borrowed it and never returned it or he gave it to me neither of us now remembers, but Ecotopia, the visionary novel 25 publishers rejected before Ernest Callenbach published it himself in 1975, was still there ready to be read again a lifetime later.
Callenbach once called that book "my bet with the future," and in publishing terms it would prove a pure winner. To date it has sold nearly a million copies and been translated into many languages. On second look, it proved to be a book not only ahead of its time but (sadly) of ours as well. For me, it was a unique rereading experience, in part because every page of that original edition came off in my hands as I turned it. How appropriate to finish Ecotopia with a loose-leaf pile of paper in a New York City where paper can now be recycled and so returned to the elements.
Callenbach would have appreciated that. After all, his novel, about how Washington, Oregon, and Northern California seceded from the union in 1979 in the midst of a terrible economic crisis, creating an environmentally sound, stable-state, eco-sustainable country, hasn't stumbled at all. It's we who have stumbled. His vision of a land that banned the internal combustion engine and the car culture that went with it, turned in oil for solar power (and other inventive forms of alternative energy), recycled everything, grew its food locally and cleanly, and in the process created clean skies, rivers, and forests (as well as a host of new relationships, political, social, and sexual) remains amazingly lively, and somehow almost imaginable — an approximation, that is, of the country we don't have but should or even could have.
Callenbach's imagination was prodigious. Back in 1975, he conjured up something like C-SPAN and something like the cell phone, among many ingenious inventions on the page. Ecotopia remains a thoroughly winning book and a remarkable feat of the imagination, even if, in the present American context, the author also dreamed of certain things that do now seem painfully utopian, like a society with relative income equality.
"Chick" — as he was known, thanks, it turns out, to the chickens his father raised in Appalachian central Pennsylvania in his childhood — was, like me, an editor all his life. He founded the prestigious magazine Film Quarterly in 1958. In the late 1970s, I worked with him and his wife, Christine Leefeldt, on a book of theirs, The Art of Friendship. He also wrote a successor volume to Ecotopia (even if billed as a prequel), Ecotopia Emerging. And as he points out in his last piece, today's TomDispatch post, he, too, has now been recycled. He died of cancer on April 16th [2012] at the age of 83.
Just days later, his long-time literary agent Richard Kahlenberg wrote me that Chick had left a final document on his computer, something he had been preparing in the months before he knew he would die, and asked if TomDispatch would run it. Indeed, we would. It's not often that you hear words almost literally from beyond the grave — and eloquent ones at that, calling on all Ecotopians, converted or prospective, to consider the dark times ahead. Losing Chick's voice and his presence is saddening. His words remain, however, as do his books, as does the possibility of some version of the better world he once imagined for us all. Tom
Epistle to the Ecotopians
By Ernest Callenbach
[This document was found on the computer of Ecotopia author Ernest Callenbach (1929-2012) after his death.]


text:
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Victorian 2-Ply Wool Yarn∼
Yarn line #162
- Pricing 100 g hank:
- Volume discounts apply
- mix colors for discounts!
- • $12.75, 1+
- • $11.50, 8+
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Skip to: Our color [old] :
Victorian 2-Ply Wool Yarn details:
Fiber content: 100% Wool. Gauge is 6-7 on sz 3-5. Yardage: 1485 yards/lb. ( 325 yards/100 g hank. ) Fine yarn, standard yarn weight 2. Wraps/inch (wpi) 14. Weaving tabby sett 8 to 10. Weaving twill sett 10 to 12.
Victorian 2-Ply Wool Yarn description:
Halcyon Yarn's Signature Victorian 2-Ply Wool is a versatile, simple sport weight yarn excellent for hand knitting or machine knitting and Victorian 2-ply is especially nice in multi-color work. Victorian 2-ply wool is an excellent wool weaving yarn. Weavers enjoy using 2-Ply Wool as warp and weft for shawls, scarves, blankets, and outerwear pieces. Our exclusive Victorian sport weight wool offers a much broader range of colors than most sport weight wools, making it an ideal yarn for colorful fair isle and multi-color sweater designs. Victorian Wool's softness is derived from a lofty spin in each ply with a slightly softer twisting than in many woolen-spun 2-ply yarns, it will soften and loft up even more when washed or fulled and the low pilling adds a long life to any piece.
Halcyon's Signature Victorian Collection yarns are custom spun exclusively for Halcyon Yarn and dyed in the USA. You'll find that each of these yarns is gorgeous and economical on it's own or combined with other yarns. The Victorian yarns offer a broad and interchangeable color palette so they coordinate beautifully with each other. Our Victorian yarns couldn't be prettier or easier to work with!
Weavers, alternate Victorian 2-Ply warp or tabby weft with Victorian Bouclé or Victorian Brushed Mohair for pattern in overshot or summer and winter. Knitters and crocheters will love double-stranding any two Victorian styles together on size 10.5 knitting needles (size K or larger crochet hook) at 3 stitches per inch for a personalized "designer" bulky yarn.
Care: Hand wash in cool water and lay flat to dry, or dry clean. Mothproofed.
Weaving tip: If you're having trouble maintaining your selvedges in balanced weaves, especially with a soft warp and light tension you might have when using the Victorian yarns, try using a strand of Pearl Cotton as a floating selvedge. These threads can be tensioned more tightly than the rest of the warp to maintain width by adding a hanging weight, then pulled out before washing.
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Victorian 2-Ply Wool is wonderful in these book based projects:
|Book name: Best of Weaver's Overshot is Hot!
Two Jackets of Many Colors, on pg. 22.
Materials needed: 4-shaft loom, 45" weaving width; 8 dent reed; 1 shuttle for tabby weft and 1 for each pattern-weft color..
|Book name: The Natural Knitter
Architectural Rib Pullover, on pg. 86.
Materials needed: Knitting needles size 3 & 4, 16" size 3, double point size 4, stitch markers, stitch holders, safety pins, tapestry needle..


text:
What Credit Ratings Are & Are Not
Credit Ratings Are Expressions Of Opinion About Credit Risk
Credit ratings are opinions about credit risk published by a rating agency. They express opinions about the ability and willingness of an issuer, such as a corporation, state or city government, to meet its financial obligations in accordance with the terms of those obligations. Credit ratings are also opinions about the credit quality of an issue, such as a bond or other debt obligation, and the relative likelihood that it may default.
Ratings should not be viewed as assurances of credit quality or exact measures of the likelihood of default. Rather, ratings denote a relative level of credit risk that reflects a rating agency's carefully considered and analytically informed opinion as to the creditworthiness of an issuer or the credit quality of a particular
A Matter of Opinion
Standard & Poor's ratings opinions are based on analysis by experienced professionals who evaluate and interpret information received from issuers and other available sources.
What Credit Ratings Are & Are Not
Credit Ratings Are Forward Looking And Continually Evolving
While a key component of credit rating analysis is the evaluation of historical data, ratings opinions are designed to be forward looking. In other words, ratings take into account not only the present situation but also the potential impact of future events on credit risk. For example, in assigning its ratings, Standard & Poor's factors in anticipated ups and downs of business cycles in specific industries as well as trends and events that can be reasonably anticipated.
At the same time, ratings are not static. Rating opinions may change if the credit quality of an issue or issuer alters in ways that were not expected at the time a rating was assigned. For instance, the acquisition or divestiture of a line of business, a change of policy by a government, or erosion in the credit markets that was not foreseen may result in an adjusted rating that reflects this new information.
A Matter of Opinion
Standard & Poor's ratings opinions are based on analysis by experienced professionals who evaluate and interpret information received from issuers and other available sources.
What Credit Ratings Are & Are Not
Credit Ratings Are Intended To Be Comparable Across Different Sectors
A Matter of Opinion
Standard & Poor's ratings opinions are based on analysis by experienced professionals who evaluate and interpret information received from issuers and other available sources.
What Credit Ratings Are & Are Not
Credit Ratings Do Not Indicate
A Matter of Opinion
Standard & Poor's ratings opinions are based on analysis by experienced professionals who evaluate and interpret information received from issuers and other available sources.
What Credit Ratings Are & Are Not
Credit Ratings Are Not Absolute Measures Of Default Probability
Standard & Poor's credit ratings are not exact measures of the probability that a certain issuer or issue will default but are instead expressions of the relative credit risk of rated issuers and debt instruments. In assigning ratings, Standard & Poor's rank orders issuers and issues from strongest to weakest based on their relative creditworthiness and credit quality within a universe of credit risk. To link any rating to precisely expected default rates would imply a degree of scientific accuracy that the rating process is not intended to provide or deliver.
For example, if the transition and default studies performed by Standard & Poor's indicate that the annual average default rate of 'BBB' issues was 0.30% historically, this does not mean that a 'BBB' rating is a mathematical prediction of a 0.30% default probability. If a particular set of 'BBB' rated issues suffer a 0.60% default rate, it does not mean those ratings were somehow wrong or inaccurate. In fact, default rates for a specific rating category may fluctuate over time as a result of industry disruptions and economic cycles.
A Matter of Opinion
Standard & Poor's ratings opinions are based on analysis by experienced professionals who evaluate and interpret information received from issuers and other available sources.
Credit Rating Agencies: What They Do & How They Differ
Rating Agencies Evaluate Credit Risk
As a group, credit rating agencies publish ratings and research about the creditworthiness of issuers and the credit quality of specific debt instruments. Despite general similarities among rating agencies, the types of issuers and issues/securities they rate, the ways in which they assign their ratings and what those ratings signify varies. Some rating agencies limit their work to specific regions, sectors, and/or asset classes, while others maintain global coverage and provide ratings across all sectors and asset classes.
Some major differences among rating agencies, which are explored in the following sections of this module, include:
Some credit rating agencies, including major global agencies like Standard & Poor's, are publishing and information companies that evaluate the credit risk of issuers and individual debt issues. They formulate and disseminate their opinions for use by investors and other market participants who may consider credit risk in making their investment and business decisions. Partly because rating agencies are not directly involved in capital market transactions, they have come to be viewed by both investors and issuers as impartial, independent providers of opinions on credit risk.
While investors and other market participants are also capable of analyzing credit quality, rating agencies can generally perform credit analyses more efficiently and economically than other firms because they specialize in that activity and devote substantial resources to it.
Standard & Poor's: A Major Global Rating Agency
Standard & Poor's is a financial publishing, media, and information company with deep roots in those business segments. It applies many of the same principles that financial newspapers and magazines do in order to preserve their journalistic independence and integrity.
The credit analysis performed by Standard & Poor's analysts is in some ways similar to the credit analysis that analysts at banks or other financial institutions perform. However, rating analysts sometimes have access to confidential information that is provided by issuers, or investment bankers/arrangers, of structured finance transactions as part of the rating process. Standard & Poor's also gains a valuable perspective from working on a wide range of credit ratings throughout the world.
Standard & Poor's performs independent evaluation and reporting of credit risk, and is not otherwise involved in capital market transactions. As a result, Standard & Poor's credit ratings, which are assigned based on transparent criteria, have long been utilized by capital market participants.
The Origin Of Standard & Poor's Credit Ratings
Standard & Poor's Ratings Services traces its history back to 1860, the year that Henry Varnum Poor published the History of Railroads and Canals of the United States.
Credit Rating Agencies: What They Do & How They Differ
Rating Methodologies/Approaches
Rating agencies use different approaches in forming and publishing their opinions about credit risk. Some agencies use analysts, some use mathematical models, and some use a combination of the two. As rating agency models differ with regards to their criteria, processes, and ratings definitions, users of ratings should consider such differences if they are using credit ratings as benchmarks.
Analyst-Driven Credit Ratings
Credit rating agencies, such as Standard & Poor's, that use the analyst-driven approach employ analysts to evaluate and express an opinion on the relative creditworthiness of issuers and the relative credit quality of debt issues. In rating an issuer, such as a corporation or municipality, analysts conduct a review of the financial performance, policies, and risk management strategies of that issuer as well as of the business and economic environment in which the issuer operates. In addition to evaluating financial data, credit analysts typically weigh qualitative information, such as long-term strategies, as they assess the issuer's ability and willingness to meet its financial obligations in a timely manner.
Rating agencies that use the analyst-driven approach often employ analysts with experience in evaluating the relative credit risk of an entity or security. In addition to their experience with and understanding of the credit markets, analysts are trained to think critically and to evaluate complex business, financial, and accounting issues. Many analysts also bring to bear specializations in specific industry segments and transaction structures in evaluating credit risks attributes.
Model-Driven Credit Ratings
A small number of rating agencies use the model-driven approach, focusing more exclusively on quantitative data that they incorporate into a mathematical model to produce their ratings, which are generally point-in-time assessments. For example, an agency using this approach to assess the creditworthiness of a bank or financial institution evaluates that entity's asset quality, funding, and profitability based on figures that appear in that entity's financial statements and regulatory filings. The mathematical formulas used to measure creditworthiness are often proprietary and highly complex.
S&P's Analyst-Driven Rating Process
Credit Rating Agencies: What They Do & How They Differ
Global vs. National Ratings Agencies
Some rating agencies focus only on issuers and issues within a specific country or region, while others provide a global perspective.
Global credit rating agencies, such as Standard & Poor's, publish ratings and research about the creditworthiness of issuers and the credit quality of debt issues around the world. By applying standardized rating criteria on a global basis, Standard & Poor's ratings provide a benchmark for assessing the relative credit quality of issuers and instruments. These global scale ratings may be useful to institutional investors who seek geographic diversification in their debt investments while at the same time adhering to internal investment guidelines that require a global benchmark.
National rating agencies can provide a frame of reference different from that of global agencies by concentrating on a particular country and a smaller universe of securities. For example, while global agencies may consider national economic and political risk in their ratings, national agencies may employ a country-specific rating scale. The national scale may be helpful in comparing the relative risk of securities issued in a single country. Global rating agencies may also offer country-specific scales in addition to their global scale ratings, as Standard & Poor's does.
The Origin Of Standard & Poor's Credit Ratings
Standard & Poor's Ratings Services traces its history back to 1860, the year that Henry Varnum Poor published the History of Railroads and Canals of the United States.
Credit Rating Agencies: What They Do & How They Differ
History of Standard & Poor's
|Henry Varnum Poor publishes a 200-page book containing operational and financial details on more than 120 railroad and canal companies
|First credit ratings on corporate bonds and sovereign debt
|First ratings on municipal bonds
|First financial strength ratings on insurance companies
|First ratings on long-term debt of bank holding companies
|First rating (non sovereign) issuers located outside the United States
|First ratings on mortgage-backed securities
|Began opening European offices
|First ratings on fixed income bond and money market funds
|First ratings on commercial mortgage-backed securities (CMBS), and asset backed securities (ABS) (made up of equipment leases, student loans, and other consumer obligations)
|Opened office in Japan
|First ratings on collateralized debt obligations (CDOs)
|Opened office in Australia, through acquisition of Australian Ratings
|Opened offices in Canada and Mexico, through acquisition of CAVAL
|Opened office in Hong Kong
|First ratings on bank loans
|First ratings on catastrophe bonds
|Opened offices in Argentina (through acquisition), Brazil, and Taiwan
|First ratings on synthetic CDOs
|Opened office in Russia
|Introduced recovery ratings
|Opened office in China
|Investment in India (majority investment in CRISIL Ratings)
|Opened offices in Dubai, South Africa, and Israel (through the acquisition of Maalot)
The Origin Of Standard & Poor's Credit Ratings
Standard & Poor's Ratings Services traces its history back to 1860, the year that Henry Varnum Poor published the History of Railroads and Canals of the United States.
- The Origin Of Standard & Poor's
Credit Ratings
Standard & Poor's Ratings Services traces its history back to 1860, the year that Henry Varnum Poor published the History of Railroads and Canals of the United States. Poor was concerned about the lack of quality information available to investors and embarked on a campaign to publicize details of corporate operations. Standard & Poor's has been publishing credit ratings since 1916, providing investors and market participants worldwide with independent analysis of credit risk.
- The Origin Of Standard & Poor's
Credit Rating Agencies: What They Do & How They Differ
How Agencies Are Paid For
How Standard & Poor's Manages Potential Conflicts of Interest
To protect against potential conflicts of interest when paid by the issuer, Standard & Poor's has established a number of safeguards.
Credit Rating Agencies: What They Do & How They Differ
Regulation of Credit Rating Agencies–
In the U.S. and Elsewhere
In the United States, the Securities and Exchange Commission (SEC) has designated a group of credit rating agencies as Nationally Recognized Statistical Rating Organizations (NRSROs). These NRSROs may use either the analyst-driven or model-driven approach to rate specific issuers and debt issues. The SEC granted Standard & Poor's NRSRO registration under the 2006 Credit Agency Reform Act on September 24, 2007.
In 2006, the US Congress passed the Credit Rating Agency Reform Act, which imposed regulation on NRSROs. The Act allows the SEC to set guidelines for NRSROs in order to protect against conflicts of interest and maintain the independence of credit rating agencies. The law is also intended to increase competition and make the process of designating NRSROs more transparent, specifically by requiring formal SEC approval of a rating agency's NRSRO status. The SEC continues to develop rules and regulations which impose additional requirements on NRSROs to address these potential issues.
As NRSROs utilize different approaches (analyst-driven vs. model driven) and operate under different business models (issuer-pay vs. subscription), users of NRSRO ratings should make sure that they have a full understanding of the rating agency; their ratings methodology and processes.
The framework for regulating credit rating agencies outside the United States is diverse and continues to evolve. Since credit rating agencies are regulated differently in different jurisdictions around the world, the International Organization of Securities Commissions (IOSCO), which is the umbrella body of the world's top securities regulators, introduced a code of conduct for credit rating agencies (the Code) that is designed to address potential conflicts of interest that rating agencies face, and to increase transparency and disclosure in the industry. The Code and related principles were designed to apply to all types of credit rating agencies operating in various jurisdictions around the world.
Who Uses Credit Ratings & Why
Ratings & The Capital Markets
While Standard & Poor's opines and reports on, but does not participate in, capital market transactions, the ratings opinions that it provides may impact the capital markets and the decisions of market participants.
For example, credit ratings may play a useful role in enabling corporations and governments to raise money in the capital markets. Instead of taking a loan from a bank, these entities sometimes borrow money directly from investors by issuing bonds or notes. Investors purchase these debt securities, such as municipal bonds, expecting to receive interest plus the return of their principal, either when the bond matures or as periodic payments.
Credit ratings may also facilitate the process of issuing and purchasing bonds and other debt issues by providing an efficient, widely recognized, and long-standing measure of relative credit risk. Investors and other market participants may use the ratings as a screening device to match the relative credit risk of an issuer or individual debt issue with their own risk tolerance or credit risk guidelines in making investment and business decisions.
For instance, in considering the purchase of a municipal bond, an investor may check to see whether the bond's credit rating is in keeping with the level of credit risk he or she is willing to assume. At the same time, credit ratings may be used by corporations to help them raise money for expansion and/or research and development as well as help states, cities, and other municipalities to fund public projects.
While not an indication of investment merit, credit ratings signal Standard & Poor's opinion of the perceived risk of a particular debt issue. The greater the credit risk, the higher return investors may expect for assuming that risk. For this reason, credit ratings may be used by both issuers and investors when a debt issue is first issued in the primary markets, and may continue to be used by investors who trade securities in the secondary markets.
Bond/Note Issuance Flowchart
Who Uses Credit Ratings & Why
Investors most often use credit ratings to help assess credit risk and to compare different issuers and debt issues when making investment decisions and managing their portfolios.
Individual investors, for example, may use credit ratings in evaluating the purchase of a municipal or corporate bond from a risk tolerance perspective.
Institutional investors, including mutual funds, pension funds, banks, and insurance companies often use credit ratings to supplement their own credit analysis of specific debt issues. In addition, institutional investors may use credit ratings to establish thresholds for credit risk and investment guidelines.
A rating may be used as an indication of credit quality, but investors should consider a variety of factors, including their own analysis.
Bond/Note Issuance Flowchart
Who Uses Credit Ratings & Why
Investment bankers help to facilitate the flow of capital from investors to issuers. They may use credit ratings to benchmark the relative credit risk of different debt issues, as well as to set the initial pricing for individual debt issues they structure, and to help determine the interest rate these issues will pay.
Investment bankers and entities that structure special types of debt issues may look to a rating agency's criteria when making their own decisions about how to configure different debt issues, or different tiers of debt.
Investment bankers may also serve as arrangers of special debt issues. In this capacity, they establish special entities that package assets, such as retail mortgages and student loans, into securities, or structured finance instruments, which they then market to investors.
Bond/Note Issuance Flowchart
Who Uses Credit Ratings & Why
Issuers, including corporations, financial institutions, national governments, states, and cities and municipalities, use credit ratings to provide independent views of their creditworthiness and the credit quality of their debt issues.
Issuers may also use credit ratings to help communicate the relative credit quality of debt issues, thereby expanding the universe of investors. In addition, credit ratings may help issuers anticipate the interest rate to be offered on their new debt issues.
As a general rule, the more creditworthy an issuer or an issue is, the lower the interest rate the issuer would typically have to pay to attract investors. The reverse is also true: an issuer with lower creditworthiness will typically pay a higher interest rate to offset the greater credit risk assumed by investors.
Bond/Note Issuance Flowchart
Who Uses Credit Ratings & Why
Businesses & Financial Institutions
Businesses and financial institutions, especially those involved in credit-sensitive transactions, may use credit ratings to assess counterparty risk, which is the potential risk that a party to a credit agreement may not fulfill its obligations. For example, in deciding whether to lend money to a particular organization, or in selecting a company that will guarantee the repayment of a debt issue in the event of default, a business may wish to consider the counterparty risk.
A credit rating agency's opinion of counterparty risk can therefore help businesses analyze their credit exposure to financial firms that have agreed to assume certain financial obligations and to evaluate the viability of potential partnerships and other business relationships.
Who Uses Credit Ratings & Why
Credit ratings are sometimes used for regulatory purposes, as exemplified by the following:
- Under the Basel II agreement of the Basel Committee on Banking Supervision, banking regulators can allow banks to use credit ratings for purposes of calculating net capital reserve requirements.
- The Securities and Exchange Commission (SEC) in the U.S. permits investment banks and broker-dealers to use credit ratings from regulated NRSROs to calculate capital levels.
- SEC regulations require that money market funds invest only in securities with high NRSRO ratings.
- Insurance regulators make use of credit ratings when assessing the reserve adequacy of insurance companies
The ABCs of Rating Scales
A Simple, Efficient Way to
Opinions Reflected
Ratings Definitions
View the complete list of Standard & Poor's Ratings Definitions and a related article on Understanding Standard & Poor's Ratings Definitions
The ABCs of Rating Scales
Investment- & Speculative-Grade Debt
Debt issues that are rated as having higher credit quality are commonly referred to as investment-grade securities. Those that are assessed to have a relatively lower credit quality are often referred to as non-investment-grade, or sometimes speculative grade, securities.
The term "investment grade" initially identified debt securities that bank regulators and market participants viewed as suitable investments for institutions such as banks, insurance companies, and savings and loan associations. Today, however, the term is used more broadly in the investment community to identify categories of issuers and issues with relatively higher levels of creditworthiness and credit quality. Market participants typically look to rating scales to determine thresholds for investment-grade securities.
In contrast, the term "non-investment-grade" is generally used in reference to debt securities where the issue or issuer currently has the ability to repay but faces uncertainties, such as adverse business or financial circumstances, which could increase the likelihood of default, or failure to meet its financial obligations in accordance with the terms of those obligations.
Ratings Definitions
View the complete list of Standard & Poor's Ratings Definitions and a related article on Understanding Standard & Poor's Ratings Definitions
The ABCs of Rating Scales
Long-Term Ratings, Ratings Outlooks, and Short-Term Ratings
Long-Term Ratings
Standard & Poor's long-term credit ratings range from a top rating of 'AAA', reflecting the strongest credit quality, to 'D' for debt issues that are actually in default and for issuers who did not meet their financial obligations or have declared that they cannot do so. The addition of pluses and minuses provides further distinctions within ratings range from 'AA' to 'CCC'. For example, a 'AA+' rating indicates a higher level of creditworthiness than a 'AA' rating, while a 'AA–' would indicate lower creditworthiness than a 'AA' rating.
Standard & Poor's assigns outlooks, which may be "positive," "negative," "stable," or "developing", to its long-term credit rate. A positive outlook suggests that the issuer's rating may be raised, while a negative outlook indicates it may be lowered. Outlooks typically have a six-month to two-year time frame and address trends or risks with the potential, but not the certainty, of raising or lowering a credit rating sometime over the next two years. Outlooks that use the term "stable" indicate that a change is unlikely, though that opinion is not a comment on the stability of the issuer's financial performance. Those that use the term "developing" describe unique situations where the effect of future events is so uncertain that the rating could either be raised or lowered.
When an event, unexpected change or criteria change occurs that is likely to cause a ratings change in the near term, Standard & Poor's places the rating on CreditWatch, which replaces the outlook on
Short-Term Ratings
Short-term ratings express opinions about the creditworthiness of an issuer or the credit quality of a debt issue in the near future. As a general rule, short-term ratings are used for issues that have maturities of one year or less, such as commercial paper. Long-term ratings are assigned to issues with maturities that are generally more than one year, such as 10-year term bonds or bank loans, or even medium term notes which usually have maturities of 3 to 5 years.
The short-term ratings scale, which has fewer grades than the long-term scale, ranges from 'A-1+,' representing extremely strong ability to meet obligations, to 'D,' which indicates payment default. The long- and short-term ratings are generally linked to one another: If an issuer's long-term credit rating is downgraded, the short-term rating may be downgraded as well. Since there are fewer short-term rating grades, each short-term rating corresponds to a band of long-term ratings. For instance, the 'A-1' short-term rating generally corresponds to the long-term ratings of 'A+', 'A', and 'A-'.
Standard & Poor's Rating Correlation Scales
The ABCs of Rating Scales
Recovery Ratings
Some credit rating agencies also incorporate into their ratings opinions the potential for recovery, which is an opinion about the amount that investors may recover in the event of default. Rating agencies that assess recovery consider the percentage of the instrument's outstanding principal that an investor can expect to receive back. When used as a rating factor, recovery prospects are an important component in evaluating credit quality, particularly in the evaluation of non-investment-grade debt.
To address the market's need for recovery information, Standard & Poor's began assigning recovery ratings in 2003 and the use of these ratings continues to evolve. As of 2008, such recovery ratings were assigned by Standard & Poor's to secured and unsecured debt of speculative-grade corporate issuers in the U.S., Western Europe, and certain other countries.
These ratings provide a forward-looking analysis based on issuer-specific and deal-specific data, and express Standard & Poor's opinion regarding prospective loss on debt issues in the event of default. Risk factors include how the debt is structured, the relationship among creditors, the jurisdiction, and how a default would affect the value of the assets.
Standard & Poor's recovery ratings use a scale of 1 to 6 rather than the letter ratings and express an opinion about the percentage of principal and unpaid accrued interest that investors may expect to receive in the case of default. The opinion is based on a number of different factors, including the rights that investors and/or creditors may have to specific assets, the potential liquidation value of the entity's assets, and the result of formal bankruptcy proceedings or informal out-of-court restructuring. The recoveries themselves may be in cash, debt, or equity securities of a reorganized entity, or some combination of the three.
The recovery rating scale forms the basis for adjusting the credit rating of an issue up or down relative to the credit rating of the issuer.
Recovery Ratings Scale & Issue Rating Criteria
The ABCs of Rating Scales
Other Standard & Poor's Rating Scales
Standard & Poor's provides a number of additional ratings scales, including but not limited to: Principal Stability Fund Ratings (for money market funds), Fund Credit Quality Ratings and Fund Volatility Ratings (for bond funds) and Financial Strength Ratings (for insurance companies).
While Standard & Poor's is a global rating agency, it also provides more than a dozen country-specific national scales for countries, including Mexico, Russia, Kazakhstan, and Argentina, among others. Market participants within those countries may use these rating scales to assess the relative creditworthiness of issuers and debt issues in a given country in comparison only to other issuers and debt issues within that same country. These national scale ratings generally use Standard & Poor's rating symbols with the addition of a prefix to denote the country—for example, 'AAmx' signifies a 'AA' rating on the Mexican national scale.
Ratings Definitions
View the complete list of Standard & Poor's Ratings Definitions and a related article on Understanding Standard & Poor's Ratings Definitions
Process For Rating Issuers & Issues
Rating Issuers & Issues
Credit rating agencies assign ratings to issuers, including corporations, governments, and public finance entities, that may or may not issue debt securities, as well as to specific issues, such as bonds, notes, and structured finance instruments.
Credit rating agencies use their own proprietary rating methodologies for evaluating the creditworthiness of issuers and the credit quality of debt issues. Standard & Poor's, assigns and publishes ratings at the request of the corporations, governments, or structured finance arrangers, and in some cases will also issue ratings without request.
S&P's Analyst-Driven Rating Process
Process for Rating Issuers & Issues
Typical Process For a New Corporate or Government Rating
S&P's Analyst-Driven Rating Process
Process for Rating Issuers & Issues
Rating Corporate and Government Issuers & Issues
Request For corporate, financial institution, or government issuers, Standard & Poor's rating process is typically initiated when the issuer or its representative requests a rating for a particular debt issue.
A Standard & Poor's client business manager (CBM) typically responds to the issuer's request and enters into an agreement to rate the issuer and/or issue. All commercial matters are handled by the CBM and the terms and conditions are not negotiable.
When a new corporate or government issuer engages Standard & Poor's to provide a credit rating on an upcoming debt issue, the agency generally assigns a rating to the issuer, called an Issuer Credit Rating (ICR), which reflects an entity's overall capacity to meet its financial obligations in accordance with their terms. The agency then assigns ratings to the issuer's specific debt securities.
Standard & Poor's typically rates all publicly offered debt securities issued by a rated corporate or government entity, including those securities issued in different countries. For various reasons, including guarantees, insurance, prospects for recovery, etc., Standard & Poor's may rate an issue higher or lower than the rating assigned to the issuer itself.
S&P's Risk Factors
S&P's Analyst-Driven Rating Process
Standard & Poor's Public Finance Ratings Group, typically issues ratings that are issue-specific (e.g., general obligation notes, revenue bonds, school district bonds, or bonds to fund projects), as opposed to ICRs.
The Initial Rating Process
The initial rating process for corporate, government, and financial entities typically takes four to six weeks to complete, but can run longer or shorter. This initial process begins when the contract is signed and generally ends with the publication of the rating.
The rating process consists of several discrete steps, as shown in Standard & Poor's Typical Process For a New Corporate or Government Rating and typically includes a series of ongoing information exchanges between the rating agency and the issuer. These interactions enable Standard & Poor's to gather the information it needs to conduct its evaluation and form its rating opinion.
The Analytical Team & Rating Committee
Standard & Poor's assigns a lead analyst and generally a backup analyst to begin the rating process. Standard & Poor's selects the analysts for each rating assignment based on their knowledge of and experience with a particular issuer, sector, industry, or the type of debt obligation being issued.
To strengthen the evaluation process, Standard & Poor's appoints a committee of generally five members, including the lead and backup analysts. The role of the committee is to review and assess the lead analyst's rating recommendation for a new rating or a ratings change, to provide additional perspectives in the analysis, to provide checks and balances against conflicts and undue influence, and to provide consistent application and adherence to the ratings criteria. For repeat issuances, outlook changes, CreditWatch placements and certain other instances, the committee may be smaller, but an individual analyst can never make such a ratings decision on his or her own.
Committee members are chosen for their particular areas of expertise, which might include, for example, accounting or risk management. If the issuer is an international corporation, the committee may include analysts who are familiar with the regions and markets in which the issuer operates. In addition, Standard & Poor's appoints a committee chairperson who is responsible for overseeing the committee process and making sure that the relevant criteria are applied consistently.
Pre evaluation. Prior to meeting with the issuer's management, the analysts examine the issuer's publicly reported financial information and any other relevant information provided by the issuer. This pre evaluation helps analysts identify and define additional information needed from the issuer as well as specific matters the issuer should be prepared to address at the management meeting.
Management meeting. The purpose of the management meeting, which is generally attended by the issuer's relevant senior executives, is to enable Standard & Poor's analysts to probe pertinent information in greater detail, including public information as well as other information that may be provided by the issuer. The discussion usually takes place in person at the issuer's offices, but in some cases can take place at Standard & Poor's offices, over the phone, or a combination of all of these. At the conclusion of the meeting, Standard & Poor's will outline the committee process and provide an indication as to how long the process may take. However, the meeting may result in a request for clarification, for additional information, or for continuing dialogue.
Analysis. For corporate and government ratings, analysts typically begin their evaluation by assessing the business and financial risk profiles of the issuing entity (as summarized within the Key Analytical Considerations table below). Analysts also consider comparisons to similar entities, as such comparisons help inform the analysts' views of the entity in relation to its peers.
In evaluating the financial profile of a corporate or financial entity, for example, Standard & Poor's analysts may first examine the company's financial statements, including an evaluation of its accounting practices, focusing on any unusual treatments or underlying assumptions. To further assess a corporation's overall strengths and weaknesses, the analysts use a number of financial ratios, including those that evaluate profit margins, leverage, and cash flow sufficiency. Analysts may also take into account items that do not appear on a corporation's balance sheet, such as leases and pension liabilities that can have an impact on the company's creditworthiness.
In many cases, financial risk factors that are unique to a specific type of issuer or issue play an important role in financial analysis. For example, in analyzing the capital adequacy of international financial institutions, Standard & Poor's may make adjustments to the issuer's reported assets to incorporate Standard & Poor's view of risk levels for each of the issuer's distinct business lines and for the specific regions the issuer operates within.
In evaluating a government entity, analysts use essentially the same process, though the specific risk factors they consider differ slightly. For example, analysts focus on the economic base rather than business risk, as well as on any potential instabilities or political pressures that may affect the entity's creditworthiness.
Committee evaluation. The lead analyst presents his or her assessment to the committee, which discusses, questions, and debates the analyst's conclusions and evaluation of certain risk factors. The final rating assigned by the committee is primarily determined by applying the rating criteria to the information that the analysts have collected and evaluated. However, rather than providing a strictly formulaic assessment, Standard & Poor's factors into its ratings the perceptions and insights of its analysts based on their consideration of all of the information they have obtained. This process helps the committee to form its opinion of an issuer's overall ability to repay obligations in accordance with their terms.
The committee reviews and discusses the internal report presented by the lead analyst. This internal document, summarizes the main analytical factors and outlines the rationale for the long-term rating, outlook, and short-term rating for a specific issuer. The committee analyzes each subcategory of credit risk, such as an entity's business and financial risk profiles, and comments on particular strengths and weaknesses that affect the entity's rating. The final report summarizes the main expectations that were factored into the rating and notes the conditions that might lower or raise the rating in the future.
Notification of issuer. Standard & Poor's generally notifies the issuer of the rating and outlook, and provides a rationale for the major factors supporting the rating. If an issuer disagrees with the rating conclusion, Standard & Poor's may allow for an appeal only if the issuer can provide new and significant information to support its point of view. If an appeal is granted, Standard & Poor's will reconvene the committee, review the new information, and vote again on the rating.
Publication. For public ratings, in most cases, Standard & Poor's publishes a press release announcing the final rating along with the rationale, distributes it to the media, and posts it on www.standardandpoors.com. To verify that the factual information is correct and that no confidential information has inadvertently been disclosed, Standard & Poor's may provide the issuer with a copy of its report for a review prior to releasing it to the public. However, if the rating is provided on a private basis, the rating is not published.
Key Analytical Considerations
In rating corporate, government, and financial entities and issues, Standard & Poor's evaluates a broad range of business, financial, and entity-specific risk factors to develop the clearest and most comprehensive assessment of that entity's creditworthiness.
The following table summarizes the key analytical factors that go into determining those ratings:
|Ratings Type
|Principal Analytical Considerations
|Issuer Ratings
|For Corporate Issuers
|Issue Ratings
|For Corporate and Government Issues
Process for Rating Issuers & Issues
Process For Rating Structured
Monitoring Credit Quality
Credit Ratings Can and Do Change Over Time
Credit ratings for issuers and individual issues are not static but can and do change over time. The reasons for the changes vary, and may be broadly related to overall changes in the business environment, or they may be more narrowly focused on circumstances affecting a specific industry, entity, or obligation, such as adverse business results at a corporation or political instability facing a government. As a result, Standard & Poor's monitors, reevaluates, and if appropriate, seeks to adjust, its ratings based on the best available information.
Standard & Poor's credit ratings are meant to be forward-looking opinions of the creditworthiness of issuers and credit quality of issues. As such, to the extent possible, they factor in conditions that are likely to affect credit risk, such as the anticipated ups and downs in the business cycle. At the same time, prospective opinions are not an exact science and, while ratings are intended to be forward-looking, they should not be construed as assertions of absolute default probability but rather as relative indications of credit risk. Among other things, business cycles can vary considerably in duration and magnitude, making their impact on credit quality difficult to assess in advance with certainty.
Equally important, credit ratings and criteria are intended to evolve over time to reflect new and sometimes unanticipated situations. Standard & Poor's may change or "transition" (i.e., upgrade or downgrade) its previously issued ratings to signify a higher or lower level of creditworthiness of an issuer or credit quality of an issue.
Monitoring Credit Quality
Surveillance: Tracking Credit Quality
After issuing a credit rating, Standard & Poor's typically tracks developments that might affect the credit risk of an issuer or issue. The goal of this surveillance is to maintain a current rating by identifying matters that may result in either an upgrade or a downgrade of the rating.
Such matters could include changing industry trends, issuer performance, credit enhancements, or other credit risk factors. Analysts review ratings with a focus on potential changes to the key analytical factors that supported the earlier ratings opinion. When appropriate, analysts present recommendations for ratings changes to a Rating Committee for a possible action.
Standard & Poor's surveillance activities may lead to:
Standard & Poor's discloses changes to public ratings, generally with a short explanation, and makes them available at www.standardandpoors.com. Actions may include credit rating upgrades, downgrades, withdrawals, and suspensions, as well as changes in credit rating outlooks and CreditWatch placements and removals.
Type and Frequency of Surveillance
Standard & Poor's considers a number of different factors in determining the type of surveillance to perform on a particular rating. For example, the frequency and extent of surveillance may depend on specific risk considerations that are relevant to an individual, a group, or a class of rated entities. In addition, the regularity of surveillance may be related to the timing and availability of financial and regulatory reporting, transaction-specific performance information, and other new information from various sources.
For corporate and government ratings, it is routine to schedule periodic meetings with management. These face-to-face meetings with issuers assist analysts in staying apprised of any changes in the issuer's plans and allow them to discuss new developments, performance relative to prior expectations, and potential problem areas. For structured finance ratings, dedicated surveillance analysts monitor performance data and other pertinent information.
S&P's Analyst-Driven Rating Process
Monitoring Credit Quality
CreditWatch: The Likelihood of
Expressions Of
Monitoring Credit Quality
Outlook: Longer-Term View of a
Expressions Of
Monitoring Credit Quality
Why Credit Ratings Change
Standard & Poor's changes credit ratings in response to events or information that has an impact on the credit risk of an issuer or issue, as determined by the rating committee. While ratings upgrades and downgrades occur across the entire credit range, historically they have occurred more frequently in lower-rated categories, reflecting increased volatility in that segment of the credit spectrum. On average, higher ratings generally have been more stable than lower ratings.
If ratings are lowered, it's Standard & Poor's opinion that there is a greater likelihood of default. Conversely, if ratings are raised, Standard & Poor's believes there is less likelihood of default. A rating change denotes Standard & Poor's opinion of creditworthiness and is only one factor among others that investors should consider when making an investment decision.
Reasons for Ratings Changes
In some cases, changes in the business climate can affect the credit risk of a wide array of issuers and securities. For instance, new competition or technology, beyond what might have been expected and factored into the ratings, may hurt a company's expected earnings performance, which could lead to one or more rating downgrades over time. Growing or shrinking debt burdens, hefty capital spending requirements, and regulatory changes may also trigger ratings changes. In addition, Standard & Poor's may adjust its ratings in response to mergers and acquisitions, or an increase or decrease in projected revenues.
While some risk factors tend to affect all issuers, others may pertain only to a narrow group of issuers and issues. For instance:
- A securitized obligation based on underlying credit card payments may have geographically concentrated portfolios, exposing it to regional slumps that a more diversified pool would dilute.
- The creditworthiness of a government issuer may be affected by changes in the stability of political and economic institutions within its country.
- In the case of corporate issuers that adopt a highly aggressive business model, such as growth through large acquisitions or expansion in unproven markets, the risks associated with their ability to execute this strategy are important factors in assessing their creditworthiness.
Ratings Volatility
Volatility of ratings can be expressed either as the proportion of ratings that change or the frequency of change. Higher ratings, in general, have been more stable than lower ratings. Standard & Poor's upgraded or downgraded roughly 20% of its corporate credit ratings each year from 1981 through 2007, compared to about 10% for structured finance from 1978 through 2007. However, these percentages can increase during periods of significant and unexpected changes in the credit markets or the business environment. In addition, credit ratings for a specific industry, or for a type of structured finance instrument, can have higher or lower rates of change than the general averages.
For example, when the price of oil declined sharply in the mid-1980s, Standard & Poor's lowered its ratings on about 75% of rated companies in the oil industry, and some of the ratings were lowered repeatedly. Merger and acquisition activity at the time also weakened credit quality. In 1986, the oil industry's default rate reached 9.3% of rated companies in the industry. Declining credit quality eventually spread to Texas banks that made loans to energy companies, which led to above-average downgrades for financial institutions within the region.
Ratings Withdrawals
Standard & Poor's may withdraw a credit rating at any time. For example, it may withdraw issuer credit ratings when there is not enough information to actively monitor the rating. It also withdraws the ratings on issues that have been repaid in full. In rare cases, credit ratings may also be withdrawn at the request of an issuer, such as when a company has been acquired. In some of these cases, Standard & Poor's may temporarily suspend rather than withdraw a credit rating if there is an expectation that adequate information will become available and/or the rating is likely to be reinstated. Prior to withdrawing or suspending the rating, Standard & Poor's will affirm, downgrade, or upgrade the rating.
Ratings Changes and Structured Finance
Ratings changes are generally driven by changes in the credit performance of the underlying assets which back the structured finance instruments. For example, a structured finance vehicle may sell notes worth $100 million and receive an investment-grade rating because there is overcollateralization or a cushion of an additional $15 million in assets in the vehicle.
This overcollateralization or credit enhancement raises the total value of the asset pool to $115 million, with the additional collateral providing a buffer against future adverse conditions. But if the conditions are worse than anticipated, and the underlying assets generate less cash flow than expected, the shortfall will reduce the buffer created by the additional $15 million. As a result, Standard & Poor's could lower its rating on the related structured finance instruments to reflect the decrease in credit quality of the underlying assets in the pool.
Monitoring Credit Quality
When Ratings Change
Credit rating adjustments may play a role in how the market perceives a particular issuer or individual debt issue. Sometimes, for example, a downgrade by a rating agency may change the market's perception of the credit risk of a debt security which, combined with other factors, may lead to a change in the price of that security.
Market prices continually fluctuate as investors reach their own conclusions about the security's shifting credit quality and investment merit. While ratings changes may affect investor perception, credit ratings constitute just one of many factors that the marketplace should consider when evaluating debt securities.
Ratings Behavior: Standard & Poor's Ratings Performance
Ratings Behavior Over Time
Different types of credit ratings have different life expectancies, which can affect how ratings change over time. For example, since corporations and governments can exist indefinitely, issuer ratings tend to have a long life span. In contrast, ratings for individual debt securities and structured finance instruments expire once the debt has been repaid. Short versus long lives of ratings are important when examining ratings changes, since ratings with longer life spans are more likely to experience transitions as they are exposed to a wide array of circumstances over time.
Rating Through Different Business Cycles
For high-grade credit ratings, Standard & Poor's considers the anticipated ups and downs of the business cycle, including industry-specific and broad economic factors. The length and effects of business cycles can vary greatly, however, making their impact on credit quality difficult to predict with precision. In the case of higher risk, more volatile, speculative-grade ratings, Standard & Poor's factors in greater vulnerability to down business cycles.
Business cycles can affect individual entities in ways that have a lasting impact on their creditworthiness. For example, a company may accumulate enough cash in an economic upturn to cushion the risks of the next downturn. On the other hand, a downturn could severely deplete a firm's or local government's financial resources. While Standard & Poor's aims to keep ratings forward-looking in order to minimize their volatility, some adjustments are inevitable since information changes over time and future events can differ from expectations.
Comparability of Ratings
Standard & Poor's seeks to maintain consistency in its rating scale over time. That means that Standard & Poor's assigns a particular rating to an issuer or issue when it believes the credit risk is similar to that of issuers and issues with the same rating. For example, Standard & Poor's rates a security 'BBB' when its overall risk appears broadly similar to that of securities currently and historically rated 'BBB'. Generally speaking, a particular rating category is intended to signal a comparable level of credit risk across corporate, government, and structured finance ratings.
Ratings as Measures
Ratings Behavior/Standard & Poor's Ratings Performance
Transition and Default Studies
To measure the performance of its credit ratings, Standard & Poor's conducts studies to track default rates and transitions, which is how much a rating has changed, up or down, over a certain period of time. Agencies may use these studies to refine and evolve their analytic methods in forming their ratings opinions.
Transition rates can also be helpful to investors and credit professionals because they show the relative stability and volatility of credit ratings. For example, investors who are obligated to purchase only highly rated securities and are looking for some indication of stability may review the history of rating transitions and defaults as part of their investment research.
In addition to its studies of three broad market segments—corporate, government, and structured finance—Standard & Poor's publishes narrower transition and default studies. For example, these studies track local and regional governments separately from national governments and analyze corporate issuers based on their industry classification. The studies also distinguish among different types of structured finance instruments, such as residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs).
Standard & Poor's begins tracking its own ratings as soon as they are initially assigned. Analyzing transition and default rates by vintage, which is the year in which Standard & Poor's first rates an issue or issuer, has yielded a number of important findings:
Higher Credit Ratings Correlate Positively with
Standard & Poor's transition and default studies support the relationship between higher ratings and lower default rates. In other words, default rates tend to rise with each step down the rating scale. In addition, studies show that what market participants generally refer to as investment grade ratings ('BBB–' and above) are associated with lower default rates than non-investment grade ratings (below 'BBB–').
Lower Ratings Are Less Stable Than Higher Ratings
Ratings performance data show that lower ratings are less stable than higher ratings. This means a higher proportion of 'A'-rated issuers and issues retain their 'A' rating during a specified time period, compared with a smaller portion of 'B'-rated issuers and issues for that same period.
Ratings Are More Volatile Over Time
Ratings are more volatile over longer time periods. For example, regardless of category, transition rates over a 10 year period show greater volatility than one-year transition rates. The broader range of business conditions that can affect credit quality over the course of a longer period may partly account for this increased volatility.
Standard & Poor's Transition and Default Studies
Standard & Poor's transition and default studies have tracked the performance of structured finance instruments since 1974, government issuers since 1975, and corporate issuers since 1981.


text:
CHASKA, Minn. -- It started out as a quick trip to Colorado. Jess and Blake Dronen were there to visit Jess' best friend when she went into labor at 26 weeks.
The Chaska woman was rushed to the hospital where they told her the first 48 hours were crucial. Doctors managed to keep her from giving birth, giving their baby girl a chance at life.
"The first 10 to 14 days were really rocky with things that were going wrong with baby or me, but the last couple of weeks have been positive," says Jess in a Facetime interview from her Denver hospital bed.
Jess made it through those 48 hours, then she made it to 28 weeks and Tuesday, another milestone.
"Thirty weeks tomorrow and 32 weeks would be fabulous but every day is a blessing," says Jess.
As if that's not hard enough, the Dronen's have two little boys, ages 1 and 2,waiting at home for mommy and daddy. Blake has been traveling between Minnesota and Colorado every couple of days, and a support team in Chaska has been filling in the gaps.
"We have wonderful family here. Two grandmas who love these boys immensely, a great grandma, other relatives, neighbors, aunts and cousins, you name it. You hear it takes a village, it truly does. We're experiencing that right now," says Jess' mother Janet Albright.
The Dronen's hope to be home with their healthy baby girl before Christmas. While they know they have to be gone to give their girl a chance, it doesn't make being away from their boys any easier.
"Facetime is an amazing thing, but it's still being away from them and that's hard," says Jess.


text:
We have to admit, we were seriously disappointed when The CW didn't pick up this year's time-travel-murder-mystery-musical pilot "Joey Dakota," starring Amber Stevens. Fortunately, the network is making some strides to mend our wounded spirit.
Zap2it has learned exclusively that the "Greek" star will guest star on "90210," as Bryce, described as "attractive and highly intelligent, she's a real stunner who is as bright and upbeat as she is gorgeous."
Basically, Bryce is an applicant to work at Max's company, but when she comes in to interview, Naomi happens to see her. That whole "stunner" thing backfires a bit — upon seeing how hot and generally awesome Bryce is, Naomi may try to sabotage her job opportunity.
Stevens' first episode is set to air in November. Aside from "Joey Dakota" (seriously, it was awesome) and "Greek," she has had roles on "Grey's Anatomy," "How I Met Your Mother," and in "The Amazing Spider-Man."
"90210" premieres Oct. 8 at 8 p.m.
Photo/Video credit: Getty Images
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text:
NY Times Profiles Vagina-Equipped DeLorean Owner
Cue the sirens! This just in! There are female DeLorean owners out there and now there is officially proof because The New York Times decided to profile one Lauren J. Reilly, the owner of a completely stock 1981 DeLorean DMC-12. The 31-year-old advertising firm producer lives in Midtown Manhattan and milks the car for… »