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Moody’s Investors Services, the US giant credit ratings and risk analysis organization, has recently announced that they have undergone a review of their ABL ratings.
The report issued in January 2008, entitled ‘Refinement to ABL Ratings’, "outlines the changes Moody’s is making to differentiate the favorable recovery experience of asset-based loans (ABLs) relative to other types of senior secured first-lien loans. In most cases, the revised approach will result in a one notch upgrade to well-structured ABLs…". The announcement offers the UK finance industry some light relief in a story otherwise dominated by doom and gloom economic outlooks.
In the report Moody’s acknowledge that their current approach to rating ABLs does not fully recognize the benefits of typical ABL structure, ensuring a high expected recovery in the event of default. ABL deals are becoming increasing common and well-structured and closely monitored ABL deals will experience lower losses in default or bankruptcy than other types of senior secured first-lien loans.
As a result Moody’s is allowing their fundamental rating committees the discretion to raise ratings otherwise determined by adherence to Moody’s LGD methodology by one notch rating and, unless ABL structuring standards change from current practices, Moody’s expects higher ratings will be appropriate in most cases.
The changes are effective immediately for new ratings, and existing rating for ABL facilities will not be affected. For more information please see the attached report in full.
At this time of economic uncertainty, how nice to have something good to report.
To view the Moody Report – please
click here .
For more information on Moody – please visit www.moodys.com