European regulators have given the green light for S&P to the launch of its ‘Ratings Lite’ product for SMEs. S&P is now quietly sounding out potential clients in the UK, France and Germany for what it calls as a ‘mid-market evaluation’.
S&P’s “mid-market evaluation” requires less detailed and less regular financial disclosures to the rating agency than it would for a formal credit rating, but such ratings could help make corporate debt more attractive to investors. About 10 potential clients have so far expressed an interest, and the company has hired analysts and sales staff to push the product this autumn. Mid-size companies will be given a number from 1, for the most creditworthy, to 8. It will be offered to companies with revenues below €1.5bn and debt below €500m. S&P estimates that midsize companies in Europe must refinance €2.7tn of loans in the next five years.
Neeraj Sahai, S&P president stated that “while small businesses had benefited from a number of policy initiatives to boost bank lending, more needed to be done to spur and to stabilize direct lending to the middle market. That segment of the market is vulnerable. These companies generate a lot of employment. S&P would like to make it easier for these companies to fund themselves and to diversify their funding sources.”
The move to make it easier and cheaper for companies to purchase an assessment of their creditworthiness comes as regulators around the world flex new powers of scrutiny over credit rating agencies.
Source: Financial Times