Standard & Poor’s Ratings Services has released changes to its recovery rating scale and issue rating framework. It also announced plans for extending recovery ratings into other areas of the debt market, including unsecured corporate, sovereign and financial service issues.
The new recovery rating scale includes an additional rating category (Recovery Rating ‘6’) at the low end of the scale. This revised scale provides greater differentiation of recovery prospects up and down the scale, from the most well-secured instruments through the least-protected, S&P said in a statement.
REVISED RECOVERY RATINGS, RANGES, AND ISSUE RATINGS FOR SPECULATIVE-GRADE ISSUERS:
Recovery Rating Description of Recovery Range Issue Rating*
1+ Highest expectation, Full recovery 100% +3 notches
1 Very high recovery 90%-100% +2 notches
2 Substantial recovery 70%-90% +1 notch
3 Meaningful recovery 50%-70% 0 notches
4 Average recovery 30%-50% 0 notches
5 Modest recovery 10%-30% -1 notch
6 Negligible recovery 0%-10% -2 notches
*Indicates issue rating “notches” relative to Standard & Poor’s issuer credit rating.