Standard & Poor’s has begun assigning recovery ratings to the debt of 16 speculative-grade-rated Mexican corporations, as global investors are forced to place more focus on the recovery of principal after a borrower’s potential default.
The new ratings measure the probability of an investor recovering principal and interest after a borrower defaults. S&P has already introduced similar ratings in the US and Europe; Mexico is the first country to receive the ratings in Latin America. Brazil could be next. The ratings are being rolled out globally as investors have become more concerned about the chances of companies defaulting because of the deteriorating state of corporate debt worldwide.
José Coballasi, an analyst at Standard & Poor’s in Mexico, says: "The decision to introduce these ratings precedes the sub-prime crisis. They apply to our global universe of ratings and may be extended to our Mexican national scale ratings in the future.
| "The decision to introduce José Coballasi, Standard & Poor’s |
"This project involved considerable research about how the bankruptcy regime in Mexico works. The country made the rules much friendlier for creditors in the year 2000, and I think the law is now better than in Brazil or Chile."