S&P - Public Finance Criteria (2007). - The Global Clearinghouse

IntroductionIntroduction To Public Finance CriteriaSince beginning its credit rating activities in 1916,Standard & Poor’s Ratings Services has ratedhundreds of thousands of securities issues, corporateand governmental issuers, and structured financings.Standard & Poor’s began its ratings activities withthe issuance of credit ratings on corporate andgovernment debt issues. Responding to marketdevelopments and needs, Standard & Poor’s hasdeveloped and innovated methodologies and criteriaand now assesses the credit quality of, and assignscredit ratings to, financial guarantees, recovery ratingsand bank loans, private placements, mortgage-andasset-backed securities, mutual funds, and the abilityof insurance companies to pay claims, and assignsmarket-risk ratings to managed funds.In 2005, Standard & Poor’s published more than500,000 ratings, including 294,000 new ratingsand 260,000 revised ratings. We have issued ratingson debt securities in more than 100 countries.Standard & Poor’s rates and monitors developmentspertaining to these securities and obligors fromoperations in 21 countries around the world.Standard & Poor’s believes that over the lastcentury credit ratings have served the U.S. securitiesmarkets extremely well, providing an effective andobjective tool in the market’s evaluation and assessmentof credit risk. Standard & Poor’s recognizesthe valuable role that credit-rating agencies playin the U.S. securities markets and is committedto protecting and enhancing the reputation andfuture of its credit-ratings business. In this regard,Standard & Poor’s takes great care to assure thatthe market views its credit ratings as highly credibleand relevant, and will continue to review its practices,policies, and procedures on an ongoing basis andmodify or enhance them, as necessary, to ensurethat rigorous analytics, integrity, independence,objectivity, transparency, credibility, and qualitycontinue as fundamental premises of its operations.Standard & Poor’s Role In The Financial MarketsStandard & Poor’s is the world’s foremost providerof independent credit ratings, indices, risk evaluation,investment research, data and information,and operates under the basic principles of:■ Independence■ Objectivity■ Credibility, and■ TransparencyStandard & Poor’s recognition as a rating agencyultimately depends on investors’ willingness toaccept its judgments. Standard & Poor’s believes itis important that all users of its ratings understandhow it arrives at its ratings opinions, and it regularlypublishes ratings definitions and detailed reports onratings criteria and methodology.Standard & Poor’s rates more than USD $34trillion in bonds and other financial obligations ofobligors in more than 100 countries. Despite thechanging environment, Standard & Poor’s corevalues remain the same-to provide high-quality,objective, value-added analytical information tothe world’s financial markets.Credit RatingsStandard & Poor’s began rating the debt of corporateand government issuers nearly 100 years ago. Sincethen, its credit rating criteria and methodology havegrown in sophistication and have kept pace withthe introduction of new financial products. Forexample, Standard & Poor’s was the first majorrating agency to assess the credit quality of, andassign credit ratings to, the claims-paying ability ofinsurance companies (1971), financial guarantees(1971), mortgage-backed bonds (1975), mutualfunds (1983), and asset-backed securities (1985).A credit rating is Standard & Poor’s opinion ofthe general creditworthiness of an obligor, or thecreditworthiness of an obligor with respect to aparticular debt security or other financial obligation,based on relevant risk factors. A rating does notconstitute a recommendation to purchase, sell, orhold a particular security. In addition, a rating doesnot comment on the suitability of an investmentfor a particular investor.Standard & Poor’s credit ratings and symbolsoriginally applied to debt securities. As describedbelow, Standard & Poor’s has developed credit ratingsthat may apply to an issuer’s general creditworthinessor to a specific financial obligation. Standard &Poor’s has historically maintained separate andwell-established rating scales for long-term andshort-term instruments. Over the years, these creditratings have achieved wide investor acceptance as6 Standard & Poor’s Public Finance Criteria 2007