S&P Introduces Recovery Ratings For U.S. Secured Loans

A new rating scale for U.S. secured bank loans has been launched by Standard & Poor’s. The scale will indicate the range of expected loss or recovery that an investor can anticipate in the event of default by an issuer. Standard & Poor’s will assign the new Recovery Rating to new secured loans that it rates, along with its existing Bank Loan Rating. ‘The ratings will allow banks and institutional investors to quantify the likely loss they will experience if specific assets in their portfolios default,’ said William Chew, managing director of Standard & Poor’s. ‘Used in conjunction with Standard & Poor’s traditional default-oriented Corporate Credit Ratings, our new Recovery Ratings for secured bank loans in the U.S. will provide investors with the two critical dimensions of credit risk: default and loss given default. This information can then be used in risk management strategies, including calculating required reserves and capital adequacy.’

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