Moody’s Investors Service has extended its comment period regarding its proposed loss-given-default ratings and probability-of-default ratings to March 31, from Feb. 28. The ratings agency said it extended the comment period to make sure all those interested in discussing have the time to do so. The adoption of the new ratings and methodology would result in significant changes to existing speculative grade ratings loan ratings will most likely go up by one or two notches and bond ratings will see more balanced rating changes.
Mike Rowan, group managing director and co-head of corporate finance in the Americas, said market participants really wanted more time to understand the methodology and assess what impact higher ratings would have. He said that Moody’s does not look at pricing, but it is something that could be affected when the ratings changes go into effect. Higher loan ratings and higher recoveries could affect collateralized loan structures because pricing could go down.
The agency has been pro active in reaching out to investors and issuers to ensure they understand what the methodology is and how it works. Rowan could not comment on specific feedback other than to say that in general, market participants understand the reason Moody’s is focused on the ratings and think the methodology being proposed makes sense.
Moody’s first called for comments Jan. 9 because investors had asked the ratings agency for a better understanding of what drives the credit ratings and what is the likelihood of default, Rowan had said at the time. He explained that through the agency’s own research it had found that the ratings on senior secured bank debt relative to senior unsecured bonds seemed conservative. He would not comment on what names might be affected, but the changes would be applied to about 1,300 corporate names in North America that are speculative grade (CIN, 1/13).