Moody's Investors Service has updated its synthetic collateralized debt obligation rating model to include a framework for emerging market transactions. Dealers said CDROM 3.0 could help sales of emerging market CDOs, because ratings in the past--which didn't make specific provisions for emerging market credit--were seen as punitive to emerging markets and this dissuaded investors. Although Standard & Poor's has a rating model for emerging market deals, most investors require CDOs to be rated by both agencies, added officials.
The emerging market framework has been in development for more than 12 months, saidPaul Mazataud, managing director in structured finance at Moody's in Paris. In particular, it analyses the correlation between two corporates in the same country, or a sovereign and corporate in that country. "The two corporates may be in different businesses, but the fact they belong to the same emerging market country generates a lot of default correlation and can have strong negative impact," Mazataud said.
CDROM 3.0 is set to launch by the end of the month and will also include an up-dated framework for leveraged super senior tranches.
