The likelihood of repayment of a debt begins
with the location of the borrower, which can directly impact its ability
and willingness to make payments.
The nature and durability of the underlying
revenues associated with structured financings and revenue bonds is
based on a wide range information that is gathered in intricately
detailed interrogations of complex databases. What’s more, Smith’s
Gradings reflect absolute levels of default risk, rather than relative
financial strength ratings.
Think of Smith’s Gradings as providing you with
a bridge to safety based on the absolute high water mark rather than on,
say, the median water level over the past three years. Smith’s Repayment
Gradings range from 135 (Best) to 0 (Worst).
If a bond does default, then Smith's Recovery
Gradings provide investors with an assessment of the recoveries based on
the rights and remedies in the bond documents as well as the type of
Smith's Recovery Gradings range from 10 (full
recovery) to 0 (Nothing) so look to see if your investment might provide
you with a cushion if it falls from grace.
Event Risk are factors that
can be present but may be episodic in frequency and indeterminate in
duration. Bankruptcy, Earthquakes, Floods, Hurricanes and
other events can impact the repayment and recovery associated with any
investment. Smith’s Event Risk Gradings reflect not only an ongoing
event, but also could indicate a material threat. For example, Smith’s
Event Risk Gradings found a hospital was going to be built at the base
of a 150 year old wooden dam. We found the technology for a municipal
sludge pelletization plant was not adequately tested. And, we questioned
the economic merits of deink pulp plants.