Make credit, equity price triggers public, S&P says

New York, Jan. 25 - Standard & Poor's said that companies should be required to disclose triggers linked to credit ratings or equity prices in their borrowing or counter-party arrangements.

The call to make corporations provide better information came in a review of actions the rating agency is making, in part triggered by the discussion in the capital markets generated by Enron Corp.'s 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 its demise," said Clifford Griep, executive managing director and chief credit officer of Standard & Poor's, in a news release.

"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."

Until then, S&P said it is making a change to its practice and is asking for information from all the issuers to which it assigns an investment-grade rating. S&P aims to determine how many triggers are in use, Griep said.

"It is too early to say whether any ratings policies will be affected by the information we are getting," Griep added.

S&P also said it began an "intensive dialogue" with market participants last summer. Those discussions have already generated changes, including measures to enhance communication and commentary related to rating reviews.

Among them, S&P is now publishing commentary more frequently so that markets here its views after routine events such as earnings calls and management changes.

For companies put on CreditWatch with negative implications, S&P said it will now provide more information, including the comments on how far the company's rating will fall should certain events occur.

"This will help identify so-called credit cliff situations, where the creditworthiness and rating could decline precipitously under certain, lower probability but adverse scenarios," Griep said.

The economic downturn, increased competition in many industries and higher volatility among investment grade credits is fueling demands for more frequent - and more complete - commentary from Standard & Poor's analysts, Griep added.

The rating agency is currently examining how to incorporate movements in securities prices into its surveillance and commentary process.

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