Moody's Investors Service is set to publish a report on loan-only credit default swaps either this week or next week. It will focus on the template that is out there and how Moody's looks at it and what factors could affect a rating, explained Yuri Yoshizawa, head of collateralized debt obligation ratings.
One example Yoshizawa mentioned was that the current document the market is using allows loans to be delivered in a number of currencies, which could be problematic for some portfolios that can only invest in U.S. dollar-denominated securities. She said there can also be questions about what default probability is used in the ratings analysis, because Moody's differentiates between loans and bonds.
She emphasized that the ratings agency will not have one form-approved set of documents for use in all collateralized loan obligations; rather it will be a case by case basis. Some members of the working group had hoped the ratings agencies would be able to approve one document, so each transaction did not need separate approval (CIN, 7/24). However, one member of the working group said he thinks that if some modifications are made to the form, so that it works just for CLOs, the group may be able to get the ratings agencies on board.