The Wall Street Journal on Monday ran an important and timely story on the continued practice of ‘ratings shopping’, in which an issuer approaches multiple agencies in an effort to get the highest possible rating:
Real-estate investment firm Redwood Trust Inc. approached two credit-rating firms early this year to rate a new mortgage-bond offering. It was an important deal, the first of its kind in two years.
One of the firms, Standard & Poor’s, expressed reservations about parts of the deal. Redwood chose Moody’s Investors Service—and in April sold more than $200 million of bonds carrying Moody’s top rating of triple-A, without a hitch.
Much more interesting was the following infographic, which illustrated the ‘new pecking order’ of the agencies, based on the percentage of US RMBS deals rated by each:
S&P, Moody’s and Fitch Ratings are no longer as dominant in the business of rating bonds as they were, in part because they have pulled back partially from the mortgage market
Now, whither Egan-Jones?
Is the private label securitization market about to make a comeback? – FT Alphaville
CDO watch: ratings shopping – FT Alphaville (2007)
Rating shopping, governmental edition – FT Alphaville
TALF incentivises rating shopping says… – FT Alphaville