NEW YORK (Standard & Poor's) May 8, 2006--On March 28, 2006, Standard & Poor's
Ratings Services announced it was seeking comments regarding an alternative
approach for determining hybrid capital issue ratings in those cases where we
believe we can equate the pressure point where deferral could occur with a
particular rating level. (See release, "S&P Requests Comments On Assigning
Ratings To Hybrid Capital Issues.") This approach would take historical rating
transition statistics as a guide in assessing the likelihood that there could
be erosion in credit quality sufficient to jeopardize payments on the hybrid.
Having received thoughtful comments from a broad range of market
participants, we have decided not to implement the possible methodology at
this time. We believe there would be only a relatively small number of cases
where we could clearly equate the scenario where deferral would likely
occur—whether due to the breach of triggers under a mandatory deferrable
issue, actions on the part of a regulator to force a regulated entity to defer
payments, or the decision by a company to exercise its right of optional
deferral—with a specific rating level. Also, significant refinement of
Standard & Poor's existing rating transition data would be necessary in order
to serve as a satisfactory basis for such an approach. For example, one
practical challenge in interpreting the transition data is that over an
extended period of time, for a variety of reasons, a significant percentage of
all ratings are withdrawn.
For an overview of Standard & Poor's current methodology, see "Criteria:
Assigning Ratings to Hybrid Capital Issues," published on May 8, 2006.
Standard & Poor's is hosting a Hybrid Securities Hot Topics Conference on
May 25, 2006, in New York. The conference will provide attendees with an
overview of Standard & Poor's criteria for assessing and rating hybrid
securities issued by corporate and financial services companies. For more
information please log on to www.events.standardandpoors.com/hybrid.
The report is available to subscribers of RatingsDirect, Standard &
Poor's Web-based credit research and analysis system, at
www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may
purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail
to research_request@standardandpoors.com. Ratings information can also be
found on Standard & Poor's public Web site at www.standardandpoors.com; under
Credit Ratings in the left navigation bar, select Find a Rating, then Credit
Ratings Search. Members of the media may request a copy of this report by
contacting the media representative provided.
