| FT Letter to the Editor
By Vickie Tillman
18 March 2008
Financial Times
Sir, Arturo Cifuentes ("Credit crisis lurches from bad numbers to bad writing", Insight March 11) raises questions about the meaning of a triple-A credit rating. Simply put, a triple-A rating from Standard & Poor's is our opinion that the rated security or debt issuer has extremely strong capacity to meet its financial commitments. It is our highest rating and therefore should have the lowest probability of default.
This remains the case, even in today's volatile credit markets. Although the market valuation of many triple-A structured securities has fallen heavily - reflecting in large part their very limited market liquidity - very few have defaulted. According to our most recent structured finance rating transition study, of the 26,000 triple-A ratings issued by S&P on structured securities between 1978 and the end of 2007, fewer than 0.1 per cent have defaulted. That is broadly comparable with the historic default rate for triple-A corporate bonds.
Triple-A ratings can and do change, both in the corporate and structured bond markets, and they can and do default. However, it remains the case that they default much more rarely than securities that were originally rated lower.
Standard & Poor's is committed to continuing to enhance its analytics and the information we provide the market, and we continue to take steps to build greater confidence in our ratings and support the efficient operation of the global credit markets.
Vickie Tillman
Executive Vice President
Ratings Services
Standard & Poor's
New York, N.Y.
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