Structured Finance

Recovery assumptions are an important input into CDO transactions. However, the enhancements described in the article “Recovery Analytics Update: Enhanced Recovery Scale And Issue Ratings Framework” dated 30 May 2007 do not have a significant effect on CDO analytical methodology or on CDO ratings. Under our current CDO methodology, we consider the default probability to be driven by the issuer rating for industrial, financial and sovereign debt. The recovery expectations are asset-specific, based on the seniority and security of the asset. In an October 17, 2006 article entitled ”CDO Spotlight: Using Standard & Poor's Recovery Ratings in Cash Flow CDOs,” we highlighted that CDO managers have an option to incorporate our recovery ratings as the source of recovery estimates for CDO purposes. More recently we published an article on July 23rd 2007 entitled "Updated Global Recovery Ratings For Use In Cash Flow CDOs".

For more information contact:
Henry Albulescu: +1 (212) 438 2382
Katrien Van Acoleyen: +44 (20) 7176 3860
Calvin Wong: +1 (212) 438 7495