Editorial Review of
Standard & Poor's RatingsDirect
[Category: Credit/Sovereign Risk]
S&P (together with Moody's & Fitch) holds an unusual position in country analysis: what it says actually matters. S&P sets sovereign risk ratings (AAA, AA, AA+, BB-, etc.) for the eighty-odd countries that issue sovereign bonds. Multinational banks and companies then use these ratings to decide who they can lend to or where they can do business. And the rating for a company's debt generally can't go higher than the rating for the country where that company is based. So if a rating goes down, it can bring an economy to its knees; if a rating improves, it can trigger a flood of capital.
The actual analysis is done by a small crew of analysts and editors based regionally. These are typically economists with little poli sci background -- a weakness made clear as the sovereign agencies blundered their way through the Asian financial crisis. That said, working for S&P is a prestige post that attracts the top minds. The analysts follow a travel schedule of visits to the countries they rate, where top government officials kneel before them and beg for their ratings to be upgraded. Word on the street is that this does wonders for one's ego.
S&P's ratings are free, of course, but paying for RatingsDirect gets you access to all the analysis and data. Mostly of interest to those trading emerging markets debt.
Updated May 4, 2004