Moody's Developing Issuer Guide on Its Rating Process

Moody’s Investors Services is developing a guide for issuers on what to expect when they meet with the rating agency and how its rating process works.

The special commentary report, expected to be released at the end of September, currently has the working title, “Municipal Debt Issuers’ Guide to Moody’s Ratings and Rating Processes,” said Gail Sussman, managing director of U.S. Public Finance at Moody’s.

“Issuers are looking for a new road map and a new set of guidelines about how to interact with us in the new regulatory environment that we are in,” Sussman said. “We hope that it will just bring a little bit more transparency and make the process simpler and answer a lot of open questions.”

The guide will provide insight on how often issuers should meet with credit rating agencies, what the agenda should be when talking with analysts, and what kind of communication should exist between issuers and the agency.

Sussman emphasized that the core of what Moody’s does — assigning ratings and providing independent opinions about the credit risk of municipal issuers — will not change. It’s just that some of the processes involved in how Moody’s reaches a conclusion on a rating or credit analysis is a little different, Sussman said.

Moody’s analysts have been gathering that there is a lot of mystery out there about how often issuers should be sending credit rating agencies information, Sussman said.

The degree of frequency for providing a credit rating agency information varies by issuer size. Smaller issuers that only sell debt relatively infrequently typically only file their financial statements. Larger issuers who sell frequently send rating agencies information several times throughout the year.

Sussman said Moody’s likes to receive interim and updated information whenever it’s available.

“It’s best to communicate early when you want to sell debt and you want to engage in a conversation about getting a new rating,” Sussman noted. “It’s also really good to call and talk to a lead analyst when something material has changed whether for good or bad.”

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Washington
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