Fitch: Guidelines for VRDOs & CP Supported by Internal Liquidity.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- In a newly released criteria report, Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has updated the guidelines for rating variable-rate demand obligations variable-rate demand obligation A floating-rate debt obligation that has a nominal long-term maturity as well as an option allowing the investor to put (sell) the obligation back to the trustee, generally at par plus accrued interest. and commercial paper issued with internal liquidity. Variable-rate demand obligations (VRDOs) and commercial paper (CP) accrue interest at short-term rates, generally allowing obligors to lower their interest costs. However, both VRDOs and CP entail frequent payment obligations, resulting in the need for access to liquidity if there is a failure to remarket or roll over the instrument. Such liquidity may be provided by a liquidity facility from a commercial bank or other financial institution, or through the internal funds internal funds Funds that are raised within a firm. For example, income after taxes and noncash expenses, such as depreciation, provide a firm with funds to use in the acquisition of investments. of the obligor. Fitch's short-term ratings address the likelihood of timely repayment of the tender price of VRDOs and the maturity value of CP. When liquidity is provided internally by the obligor, Fitch considers the issuer's overall financial strength, management expertise to administer potentially frequent payments to bond/noteholders, and liquid internal resources to comfortably fund maximum tender requirements for VRDOs or maturity payments for CP without disrupting normal operations or the provision of regular services. The new report, 'Guidelines for Rating Variable-Rate Demand Obligations and Commercial Paper Issued with Internal Liquidity,' dated March 7, 2006, is available through Fitch Research on the Fitch Ratings web site at 'www.fitchratings.com' Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion