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S&P Capital IQ Launches Tool To Assess The Default Risk Of Public And Private Companies

Stocks in this article: MHFI

NEW YORK, Oct. 7, 2013 /PRNewswire/ -- S&P Capital IQ, a leading provider of multi-asset class research, data and analytics, today announced the launch of PD Model Fundamentals – an innovative tool used to assess the probability of default (PD) of public and private companies. PDs produced from this tool enable users to screen and identify companies with a higher likelihood of defaulting in the short- to medium-term.

PD Model Fundamentals uses a combination of financial ratios and macroeconomic factors to assess credit risk for global public and private companies.  A unique feature of the tool is that it generates two PDs for each company – one for financial risk and one for business risk – that are then rolled into one single PD reflecting the company's overall creditworthiness. A company may look stable from a numbers perspective (i.e., financial risk), but may be weak based on country/industry risk or their relative competitive position (i.e., business risk), or vice versa. Having these two measures enables users to dig deeper into potential problems and understand their origins. The quantification of business risk factors is possible with S&P Capital IQ's unique data set of coverage for hundreds of thousands of public and private companies, which includes both financials and market intelligence on diversification, market share, ownership or management.

"The breadth of PD Model Fundamentals supports the direct comparison of credit risk between large and small public and private companies across developed, emerging and frontier markets," said Silvina Aldeco-Martinez, Managing Director, S&P Capital IQ. "Since we use one single set of input factors across countries and industries, users can significantly streamline their data collection processes and confidently compare companies from different regions. We have coverage for every country via a thorough parameterization of country and industry risks, including all developed economies and even locations without public sovereign credit ratings such as Myanmar and Nicaragua."

"Looking at results for companies based in North America as an example," Aldeco-Martinez added, "our PD Model Fundamentals shows that private companies have been benefiting from the economic recovery since 2010, but their PD levels continue to be greater than those for listed companies, leaving them around 1.5 times more likely to default. This is because public companies tend to be larger and more diversified; doing business outside the U.S. with regions that may be faring better economically."   

"PD Model Fundamentals has an impressive statistical performance that is unrivaled in the market for both public and private companies, providing a superior ability to detect companies whose credit profile is deteriorating," said Marcel Heinrichs, Director, Market Development. "The PDs have been developed on data that captures the entire period of the latest financial crisis, making them extremely robust. Users can obtain a PD for a particular company, with a breakdown into financial and business risk, a term structure of one- to five-years, and a mapping to credit scores in letter grade nomenclature. Alternatively, they can just obtain a final one-year PD. Whichever complexity or simplicity users need for their analysis, PD Model Fundamentals can help," Heinrichs concluded.

The PD Model Fundamentals offering complements a broad array of tools offered by S&P Capital IQ for complete coverage of short-term, mid-term and long-term views of credit risk. This includes PD Model Market Signals that provides daily estimates of default and CreditModel, a quantitative tool that uses financial statement information to create long-term credit scores akin to fundamental credit risk analysis. These models seamlessly integrate a company's proprietary data with public and private company data available on the S&P Capital IQ platform. Users can automatically produce measures of credit risk for hundreds of thousands of public companies – which include more than 99% of global market capitalization – and private companies stored in a pre-calculated credit scores database. User applications enable clients to score any company, conduct sensitivity analysis or check the impact of stressed scenarios by using Excel® Plug-in. Users can choose from an array of distribution channels including web services, data feeds and the S&P Capital IQ desktop.

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