How Smith's Gradings Work

Smith’s Grading scale provides a comprehensive and unified credit comparison that is consistently applied for all securities.

We provide a comprehensive comparison

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.    Its principled and proven approach to credit analysis is expressed on Smith’s universal scale. Across borders and spanning global credit sectors, Smith’s Gradings allow risk management to implement scenario driven computer programs that are power by Smith’s event alerts.

Providing trusted insights 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 two decades of default and recovery experience.

Smith’s Credit Grading System has three components:

  1. Long-term ability to make timely debt service payments/nature and durability of revenues
  2. Recovery/residual value;
  3. Event risk.

Smith's Research & Gradings provides Credit Reports utilizing Smith's Grading scale. Smith's Credit Reports are  comprehensive in scope and provide a credit rationale for Smith’s Gradings.

Smith’s Flash Reports are descriptive and summary in nature, featuring key credit factors, security provisions and utilize Smith's Grading scale.Smith's Research & Gradings can also produce full compliance reports, distressed gradings reports, portfolio gradings and customized credit reviews for board level requests.

Smith’s Credit Grading System has three major components:

Repayment 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).

Recovery Gradings

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 Risk Grading

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.