Standard & Poor’s revised criteria for local government issuers and their general obligation bonds, which it plans to finalize next week and implement over the next 12 months, is likely to cause 10% if its ratings to decrease, 30% to increase and 60% to remain the same, the rating agency said in a report issued Thursday.
The rating agency said it maintains issuer or GO ratings for more than 4,000 local governments and that these rating changes would result from the new criteria, assuming the governments maintain their current credit rating characteristics.
The new criteria, which will not apply to special purpose districts, will be effective upon publication the week of Sept. 9, it said.
The rating agency said it decided to update the criteria as part of its commitment to the market to “enhance transparency, rigor and specificity of its criteria across sectors and asset classes.”
“Our objective is to provide market constituents with greater insight into how we rate local governments and to enhance the global comparability of our ratings through a clear, coherent, and globally consistent criteria framework,” it said in the report.
Standard & Poor’s published an advance notice of proposed criteria in January 2012, then a revised ratings framework in March of that year. It collected public comments over a three-month period and met with several hundred market participants through roundtables, teleconferences and meetings. In May 2012, the rating agency published answers to frequently asked questions on the proposed criteria and in September of that year it released a report summarizing the comments it received.
The report issued Thursday details Standard & Poor’s plans for implementing the new criteria. Once it is released, the criteria will be used for all new issue rating requests, including those already in process.
The agency said it plans to publish its institutional framework factor scores and rationales for each state simultaneously with the new criteria.
From Sept. 16 through mid-December, Standard& Poor’s will review all if its credits with a population of 1 million or more. Once those reviews are completed it will continue its review process through Sept. 14.
Any rating changes will be communicated through releases for the particular credit, the rating agency said.
