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ARCHIVE | Criteria | Corporates | General: Identifying Rating Triggers and Other Contingent Calls on Liquidity Mar 02
Standard & Poors, March 2002
Abstract
Standard & Poor's has been working on ways to identify for investors corporate exposure to contingent calls on liquidity. The concern regards any provision in financing or operating agreements, but particularly ratings triggers, that could cause a liquidity crisis. Without these provisions, a company that faces adversities may be able to stabilize itself and ultimately improve. Indeed, there are hundreds of non-investment grade companies that operate normally and finance normally-and, certainly, the majority of them are not expected to default. Yet, if, for example, certain lenders are allowed to demand repayment or terminate credit facilities merely upon a change to non-investment grade, the result could be a crisis that puts the company on the brink of default. (See 'Playing Out...
Companies mentioned in this report are: European Union,United States of America (Unsolicited Ratings)
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
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