Ratings

ASEAN obligors include all active borrowers, guarantors, insurers, and other providers of credit enhancement residing in ASEAN, as well as any foreign obligor issuing ASEAN currency-denominated debt or active in ASEAN financial markets.

For the most part, the criteria, rating methodology, and analytical processes employed for determining ratings on the Standard & Poor's ASEAN scale are the same as those employed on the Standard & Poor's global scale. The global credit rating scale is designed for global comparisons of issuers from different countries, while the regional credit rating scale is tailored to meet the specific needs of local and foreign participants in ASEAN's financial markets. Specifically:

• The regional scale provides more granular ratings across the most relevant spectrum for differentiation of credit risk among ASEAN obligors.
• Rating definitions underscore the regional character and focus of the scale, with an emphasis on credit risk relative to other ASEAN obligors and obligations. (See the full document "ASEAN Regional Scale Ratings Definitions", which is available in the Criteria section of our website at www.standardandpoors.com).

Both scales are based on the same Standard & Poor's credit risk analysis methodology and are linked by correspondence guidelines ("mapping"). Except in unusual circumstances, the regional scale is constructed in a fashion that avoids rank order reversals and inconsistent movements with the Standard & Poor's global scale. For example, if the rating of an obligor were raised on the global scale, there should not be a downgrade on the regional scale, and vice versa.

Standard & Poor's is providing the mapping guideline below for its ASEAN regional credit rating scale in anticipation of potential user interest.

MAPPING of Standard & Poor’s ASEAN Regional Scale To Global Scale Ratings
ASEAN regional scale		Global scale long-term rating
Short-term rating	Long-term rating
axA-1+	axAAA	A and above
axA-1	axAA+	A- to A
axA-1	axAA	A-
axA-1	axAA-	BBB+ to A-
axA-1	axA+	BBB to BBB+
axA-1 to axA-2	axA	BBB
axA-2	axA-	BBB- to BBB
axA-2	axBBB+	BB+ to BBB-
axA-2 to axA-3	axBBB	BB to BB+
axA-3	axBBB-	BB
axB	axBB+	BB- to BB
axB	axBB	B+ to BB-
axB	axBB-	B to B+
axB	axB+	B- to B
axB	axB	B-
axB	axB-
axC	axCCC+	CCC+
axC	axCCC	CCC
axC	axCCC-	CCC-
axC	axCC	CC
axC	axC	C
-	axR	R
SD	SD	SD
D	D	D

We note that the regional and global scales converge at the lower end of the scale (i.e. 'axCCC+' and below, versus 'CCC+' and below), as they do at the very high end (i.e. 'axAAA' versus 'AAA').

This is Standard & Poor's first comprehensive regional scale; it was developed to assist investors in the emerging asset class of ASEAN financial instruments. Standard & Poor's operates national scales in a diverse mix of national capital markets. These include Argentina, Brazil, Kazakhstan, Mexico, Russia, South Africa, and Turkey. We also provide short-term ratings on a scale for the Nordic region.

A regional scale differs from the global and national scale in terms of the basis of comparison. Regional scale ratings are based primarily on credit risk comparisons within a specific region, while global scale ratings are based on global comparisons and national scale ratings are based on comparison within a domestic context. Therefore, regional scale ratings enable relative comparison of credit risks within and across a region.

No. Each of Standard & Poor's regional or national scales is designed to meet the unique needs of a specific regional or domestic financial market, reflecting the calibration of the scale to the credit risk environment in a specific region or single country. However, there is a correspondence between the global scale and each national and regional scale.

As on our global scale, country risk considerations are a standard part of Standard & Poor's analysis for credit ratings on any issuer or issue on our ASEAN scale. Currency of repayment is a key factor in this analysis. An obligor's capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the risk that the sovereign government may restrict non-sovereign access to foreign exchange needed for debt service. These country risk considerations are incorporated in the debt ratings assigned to specific issues.

For example, Standard & Poor's may assign an ASEAN rating of 'axAA-' on a Thai issuer and its baht-denominated debt. However, that issuer's capacity to repay foreign currency obligations may be lower than its capacity to repay baht-denominated obligations because of the risk that the Thai government might restrict access to foreign exchange needed for debt service; hence, the ratings on foreign currency obligations may be constrained to the 'axA+' level. Consequently, if the Thai issuer issues a Thai baht (THB) bond into the Singapore market, Standard & Poor's is likely to assign an 'axAA-' issue rating; however, if the issuer issues a Singapore dollar (SGD) bond into the Singapore market, we are likely to assign an 'axA+' issue rating.

Like our global scale, it is possible for certain issuers with very strong credit, including, for example, issuers in the ASEAN market with international sources of support for their credit quality, to get a higher rating than the government of their country of domicile on the regional scale. This analysis is performed on a case-by-case basis, and there is not any rigid constraint or "ceiling" on the ratings of other debt issuers. The pertinent approach that Standard & Poor's will apply is the transfer and convertibility risk assessment (T&C assessment) criteria, as described in the following article: "Ratings Above The Sovereign: Foreign Currency Rating Criteria Update," published on RatingsDirect on Nov. 3, 2005.

The ASEAN scale ratings on issuers domiciled in that country could be affected if developments that drove the change in the global scale rating on the sovereign also impact the credit profile of other issuers in that country, especially issuers that had been rated the same as, or above, the sovereign rating. If the change in creditworthiness is confined to a single ASEAN country, the ASEAN scale ratings on issuers in other ASEAN countries are unlikely to change.

It should be pointed out that in periods of extreme and widespread financial stress most, or even all, regional scale ratings could decline due to acute default risks, even though the relative creditworthiness of many issuers would be unchanged. Generally, Standard & Poor's uses flexibility created by a regional scale to avoid rating revisions that might confuse the market. However, recalibration of a regional rating scale may require rating changes in rare cases.

Short-term ratings are assigned to instruments with a tenor of less than one year. Long-term ratings will be assigned to debt instruments that mature beyond one year.