Criteria | Corporates | General: Methodology And Assumptions: Recognizing The Sustainable Cash Cost Of Inflation-Linked Debt For Corporates Feb 09

Standard & Poors, February 2009

Abstract
In analyzing corporate creditworthiness, Standard & Poor's Ratings Services frequently looks beyond reported results as presented in financial statements to establish its view on the sustainable nature of cash flows and related debt metrics, to facilitate cross-company and cross-sector comparison. Our basic cash flow analysis methodology is described in "Corporate Ratings Criteria 2008" (see section "Cash Flow Adequacy"), published April 15, 2008, on RatingsDirect. This article explains how we typically factor indexation of inflation-linked debt into our adjustments to reported financial statements prepared according to U.S. GAAP and IFRS (international financial reporting standards). In summary, our analysis reduces funds from operations (FFO) by the entire interest expense, including the indexation component, to arrive at a figure we view as representative...

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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