S&P Explains European Structured Finance Downgrades

Standard & Poor’s has clarified its position on the placement of European structured finance ratings on CreditWatch with negative, developing, or positive implications following an increase rating actions in recent months. Stuart Nelson, ratings analyst in the surveillance group of Structured Finance Ratings in London, said the main rationale for using CreditWatch placements is to inform the market that, following a particular event or deviation from expected performance, the agency is in the process of collecting and analyzing information in order to evaluate its ratings on the notes in the transaction. ‘The CreditWatch tool is used if an event or a deviation from the expected trend has occurred or could occur that may have an effect on the ratings,’ he said. ‘The analysis falls outside the day-to-day surveillance of the transaction.’ Mr. Nelson was quick to stress that a CreditWatch negative or positive placement did not mean a rating change was inevitable, and conversely that ratings not on CreditWatch were not immune from immediate rating action.

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