HOW GRADINGS WORK

How Smith's Gradings Work

Smith’s Grading scale provides a comprehensive and unified credit comparison that is consistently applied for all securities — from supranational organizations and sovereign risk gradings to sub-sovereign municipal entities and corporate credit analytics.   It’s a principled and proven approach to credit analysis expressed on Smith’s universal scale.

 

Since 1992, Smith’s Gradings is a time-tested and performance-proven process. Smith’s Research & Gradings exceeds the standards of the world’s central banks and financial regulatory authorities. Smith’s Gradings has more than 2 decades of default and recovery experience.

 

Smith’s Credit Grading System has three components:

1) Long-term ability to make timely debt service payments;

2) Recovery/residual value;

3) Event risk.

 

Smith's Research & Gradings provides Flash Reports utilizing Smith's Grading scale. Smith's Flash Reports are descriptive and summary in nature.

 

Smith's Research & Gradings can also produce full compliance reports, distressed gradings reports, portfolio gradings and customized credit reviews for board level requests. Flash Reports are descriptive and summary in nature, featuring key credit factors, security provisions and Smith's Grading. The Credit Reports are comprehensive in scope and provide a credit rationale for Smith's Gradings.

REPAYMENT GRADINGS

RECOVERY GRADINGS

EVENT RISK GRADINGS

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 bankruptcy filing.

 

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 Risks 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.

 

 

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Smith's Research & Gradings,  has become a bellwether research company, often predicting significant trends and spotlighting controversial subjects sometimes months before they come to light elsewhere. SMITH’s provides independent research and third-party analysis for institutional investors. Smith's analysis is an indispensable part of Wall Street and the world's capital markets.

Smith's Research & Gradings

P.O. Box 1195

Great Falls, VA 22066

 

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smiths@smithsresearch.net

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