S&P: ''Triggers'' Should Be Made Public in Rtgs Process.

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard & Poor's

Jan. 25, 2002--In comments released today, Standard & Poor's said it had begun an intensive dialogue with market participants last summer, and that these discussions have led the rating agency to make several changes, including ones to enhance the frequency of ratings reviews and related communications.

"Many of these changes have been under way since last Fall, including publishing commentary more frequently so that the markets hear from us after routine events such as earnings calls and management changes," Clifford Griep, executive managing director and chief credit officer of Standard & Poor's, said.

"We will be providing more information on the potential of the decline of ratings in CreditWatch Negative situations, including commentary on what level the company may fall to should certain events occur," Mr. Griep said. "This will help identify so-called credit cliff situations, where the creditworthiness and rating could decline precipitously under certain, lower probability but adverse scenarios."

The full commentary, "Credit Policy Update: Changes to Ratings Process Address Economic Conditions and Market Needs," can be found on RatingsDirect, Standard & Poor's Web-based credit analysis system, and at www.standardandpoors.com.

Standard & Poor's previously published article, "Playing Out the Credit Cliff Dynamic," can also be found on RatingsDirect and www.standardandpoors.com.

Mr. Griep noted that the downturn in the economy, increased competition in many industries and the increased incidence of volatility among investment grade credits were fueling the demand for more frequent -- and more complete -- commentary from Standard & Poor's analysts. He added that Standard & Poor's was in the midst of considering how best to incorporate securities price behavior into its surveillance and commentary process.

One change Standard & Poor's has made was propelled in part by the recent Enron Corp. bankruptcy.

"Enron's use of a rating trigger or equity price trigger that was built into the company's borrowing or counter party arrangements clearly contributed to it demise," Mr. Griep said. "The existence of such triggers is not always disclosed, and we think it should be required that the existence of these triggers be made public. In the meantime, we have polled all of our investment grade issuers to determine how many triggers are in use. It is too early to say whether any ratings policies will be affected by the information we are getting."

Mr. Griep added that Standard & Poor's would continue to use both Outlooks and CreditWatch to provide more forward-looking information on individual credits.

"The feedback we have gotten from investors is that outlooks add value, no matter what the level of rating," Mr. Griep said. "Investors still want to know both the underlying trend in creditworthiness, and more importantly, what key factors could drive an upgrade or downgrade. This is what the outlook communicates."

Griep noted that the accuracy of Standard & Poor's use of Outlooks to signal credit trend was discussed in a research study, "Outlook Proves Reliable Indicator of Companies' Default Probability," which also is on RatingsDirect and Standard & Poor's home page.

Standard & Poor's, a division of The McGraw-Hill Companies (NYSE: MHP), provides independent financial information, analytical services, and credit ratings to the world's financial markets. Among the company's many products are the S&P Global 1200, the first real-time, global equity index, the S&P 500, the premier U.S. portfolio index, and credit ratings on more than 220,000 securities and funds worldwide. With more than 5,000 employees located in 18 countries, Standard & Poor's is an integral part of the world's financial architecture. For more information, visit our Web site at www.standardandpoors.com.

Copyright 2002, Standard & Poor's Ratings Services