Standard & Poor’s

With offices in 23 countries and a history that dates back more than 150 years, Standard & Poor’s is known to investors worldwide as a leader of financial- market intelligence. Today Standard & Poor’s strives to provide investors who want to make better informed investment decisions with market intelligence in the form of credit ratings, indices, investment research and risk evaluations and solutions.

S&P Indices, the world’s leading index provider, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Over $1.25 trillion is directly indexed to Standard & Poor’s family of indices, which includes the S&P 500, the world’s most followed stock market index, the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, the S&P Global BMI, an index with approximately 11,000 constituents, the S&P GSCI, the industry’s most closely watched commodities index, and the S&P National AMT-Free Municipal Bond Index, the premier investable index for U.S. municipal bonds.

S&P Capital IQ, a brand of the McGraw-Hill Companies (NYSE:MHP), is a leading provider of multi-asset class data, research and analytics to institutional investors, investment advisors and wealth managers around the world. It provides a broad suite of capabilities designed to help track performance, generate alpha, identify new trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as Capital IQ, Global Credit Portal and MarketScope Advisor desktops; enterprise solutions such as S&P Securities Evaluations, Global Data Solutions, and Compustat; and research offerings, including Leveraged Commentary & Data, Global Market Intelligence, and company and fund research, S&P Capital IQ sharpens financial intelligence into the wisdom today’s investors need.

S&P Ratings Services Key Statistics

• Business:

Standard & Poor’s is a leading provider of financial market intelligence.  The world’s foremost source of independent credit ratings, indices, risk evaluation, investment research and data, Standard & Poor’s is an essential part of the world’s financial infrastructure.  For more than 150 years, Standard & Poor’s provides financial decision-makers with the intelligence they need to feel confident about their decisions.

• History:

Standard & Poor’s history dates back to 1860.  It was acquired by The McGraw-Hill Companies, Inc. in 1966.

In 2010, Standard & Poor’s Ratings and McGraw-Hill Financial (which includes S&P Indices, S&P Equity Research, S&P Valuation and Risk Strategies, and Capital IQ) had revenues of $2.9 billion.

• Country Locations:

Argentina, Australia, Brazil, Canada, China, Dubai, France, Germany, India, Israel, Italy, Japan, Korea, Malaysia, Mexico, Russia, Singapore, South Africa, Spain, Sweden, Taiwan, United Kingdom and the United States.

• Affiliates:

Chile, Indonesia, and Malaysia

• History:

In 1860, Henry Varnum Poor published his “History of Railroads and Canals of the United States.” A founder of the financial information industry, Mr. Poor was a proponent of “the investor’s right to know.” In 1941, Standard Statistics merged with Poor’s Publishing Company creating Standard & Poor’s. Today,  more than 150 years later, Standard & Poor’s is the pre-eminent global provider of financial market intelligence and is still delivering on that original mission.

• Financial Market Intelligence

Standard & Poor’s is a leading provider of financial market intelligence. The world’s foremost source of credit ratings, indices, investment research, risk evaluation and data, Standard & Poor’s provides financial decision-makers with the intelligence they need to feel confident about their decisions.

Many investors know Standard & Poor’s for its respected role as an independent provider of credit ratings and as the home of the S&P 500 benchmark index. But Standard & Poor’s global organization also:

• Provides a wide array of financial data and information,

• Is the largest source of independent equity research and a leader in mutual fund information and analysis.

Unparalleled depth and breadth

• As financial markets grow more complex, the independent analysis, critical thinking, opinions, news and data offered by Standard & Poor’s are an integral part of the global financial infrastructure.
• Over $1.25  trillion is directly indexed to S&P indexes, and more than $4.83 trillion is benchmarked to the S&P 500 – more than any other index in the world.
• In 2010 S&P issued 162,418 new and 556,872 revised ratings.
• Capturing approximately 70% of the world’s capital markets, the S&P Global 1200 is a composite of 31 local markets from seven headline indices.
• Standard & Poor’s Equity Research is among the world’s leading providers of independent investment information, offering fundamental coverage on approximately 1,600 stocks
• Standard & Poor’s is the pre-eminent source of fundamental company and security data.

Standard & Poor’s has a long history of innovation. For example:

• Were the first to rate securitized financings, bond insured transactions and the financial strength of non-US insurance companies.

• Led the way with the first recovery ratings and incorporation of enterprise risk management into ratings criteria.

• The first Exchange Traded Fund (ETF) was based on an S&P Index and S&P indices serve as the basis for ETFs, futures and options across the globe.

S&P CAPITAL IQ/ S&P INDICES Key Statistics

About McGraw-Hill Financial

McGraw-Hill Financial, a part of The McGraw-Hill Companies (NYSE:MHP), is a leading provider of research and analytical tools for investment advisors, wealth managers and institutional investors. It was created in 2010 as a means of unlocking the value of many well known, non-ratings assets of Standard & Poor’s, an iconic name in financial research and publishing which McGraw-Hill acquired in 1967. Through its over 6,000 employees in offices around the world, McGraw-Hill Financial deploys the latest innovative technology and strategies to deliver to customers a portfolio of cross-asset analytics, integrated desktop services, valuation and index benchmarks and investment recommendations in the rapidly growing $16 billion financial information, data and analytics market. McGraw-Hill Financial operates under two leading brands. McGraw-Hill Financial is a division of the McGraw-Hill Companies formed in November 2010, and incorporating two brands.

About S&P Capital IQ

S&P Capital IQ, a brand of the McGraw-Hill Companies (NYSE:MHP), is a leading provider of multi-asset class data, research and analytics to institutional investors, investment advisors and wealth managers around the world. It provides a broad suite of capabilities designed to help track performance, generate alpha, identify new trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as Capital IQ, Global Credit Portal and MarketScope Advisor desktops; enterprise solutions such as S&P Securities Evaluations, Global Data Solutions, and Compustat; and research offerings, including Leveraged Commentary & Data, Global Market Intelligence, and company and fund research, S&P Capital IQ sharpens financial intelligence into the wisdom today’s investors need.

About S&P Indices

S&P Indices, the world’s leading index provider, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Over $1.25 trillion is directly indexed to Standard & Poor’s family of indices, which includes the S&P 500, the world’s most followed stock market index, the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, the S&P Global BMI, an index with approximately 11,000 constituents, the S&P GSCI, the industry’s most closely watched commodities index, and the S&P National AMT-Free Municipal Bond Index, the premier investable index for U.S. municipal bonds.

Headquarters:
55 Water Street
New York, NY 10041
Phone: 1-212-438-2000

Credit Rating

A credit rating is Standard & Poor’s opinion on the general creditworthiness of an obligor, or the creditworthiness of an obligor with respect to a particular debt security or other financial obligation. Over the years credit ratings have achieved wide investor acceptance as convenient tools for differentiating credit quality.

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
debt issue.

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:

• The methodologies/approaches they use in assessing risk
• Their scope of coverage
• The business models under which they operate

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.

Standard And Poor’s Debt Ratings

• AAA

An obligor rated ‘AAA’ has EXTREMELY STRONG capacity to meet its financial commitments. ‘AAA’ is the highest Issuer Credit Rating assigned by Standard & Poor’s.

• AA

An obligor rated ‘AA’ has VERY STRONG capacity to meet its financial commitments. It differs from the highest rated obligors only in small degree.

• A

An obligor rated ‘A’ has STRONG capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.

• BBB

An obligor rated ‘BBB’ has ADEQUATE capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.

Obligors rated ‘BB’, ‘B’, ‘CCC’, and ‘CC’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘CC’ the highest. While such obligors will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

• BB

An obligor rated ‘BB’ is LESS VULNERABLE in the near term than other lower-rated obligors. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitments. B An obligor rated ‘B’ is MORE VULNERABLE than the obligors rated ‘BB’, but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments.

• B

An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

• CCC

An obligor rated ‘CCC’ is CURRENTLY VULNERABLE, and is dependent upon favorable business, financial, and economic conditions to meet its financial commitments.

• CC

An obligor rated ‘CC’ is CURRENTLY HIGHLY-VULNERABLE.

Plus (+) or minus(-) The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

• C

A subordinated debt or preferred stock obligation rated ‘C’ is CURRENTLY HIGHLY VULNERABLE to nonpayment. The ‘C’ rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A ‘C’ also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying.

• R

An obligor rated ‘R’ is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. Please see Standard & Poor’s issue credit ratings for a more detailed description of the effects of regulatory supervision on specific issues or classes of obligations.

• SD and D

An obligor rated ‘SD’ (Selective Default) or ‘D’ has failed to pay one or more of its financial obligations (rated or unrated) when it came due. A ‘D’ rating is assigned when Standard & Poor’s believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. An ‘SD’ rating is assigned when Standard & Poor’s believes that the obligor has selectively defaulted on a specific issue or class of obligations but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. Please see Standard & Poor’s issue credit ratings for a more detailed description of the effects of a default on specific issues or classes of obligations.

• N.R.

An issuer designated N.R. is not rated.

• Public Information Ratings

Ratings with a ‘pi’ subscript are based on an analysis of an issuer’s published financial information, as well as additional information in the public domain. They do not, however, reflect in-depth meetings with an issuer’s management and are therefore based on less comprehensive information than ratings without a ‘pi’ subscript. Ratings with a ‘pi’ subscript are reviewed annually based on a new year’s financial statements, but may be reviewed on an interim basis if a major event occurs that may affect the issuer’s credit quality.

Outlooks are not provided for ratings with a ‘pi’ subscript, nor are they subject to potential CreditWatch listings. Ratings with a ‘pi’ subscript generally are not modified with ‘+’ or ‘-‘ designations. However, such designations may be assigned when the issuer’s credit rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group.

History of Standard & Poor’s Credit Rating Services

The following timeline provides milestones in Standard & Poor’s ratings history and global expansion: