NEW YORK - Moody's Investors Service has assigned credit ratings to about $11 billion of bank loans.
The actions last week included a B1 rating for $1.65 billion of bank facilities for Jefferson Smurfit Corp., a Ba2 rating for $880 million at S.D. Warren Co., and a Ba3 rating for the $1.4 billion of facilities for Fort Howard Corp..
Moody's, Standard & Poor's, Duff & Phelps, and Fitch all have started rating bank loans in the last year, reflecting the increasing interest of institutional investors in these credits, and the active loan trading market.
Moody's said that loan ratings, particularly for companies without any other form of rated debt, can make the loan trading business more efficient by allowing investors to compare risk and returns across a host of alternative investments.
"Changes in the bank loan market will tend to promote further convergence between the behavior of the bond market and the bank loan market," Moody's said in a report.
Loan syndicators said that such ratings also give investors greater access to various loans. "Somebody who doesn't know the paper and doesn't want to get into the paper may develop a quicker sense of interest if they have a rating," said a syndicator.
Although Moody's recently began to assign public ratings to specific bank credit facilities, use of the agency's credit ratings is not a new phenomenon.
"Syndicate banks have long used the ratings assigned to borrowers' other forms of indebtedness, such as bonds and medium-term notes, to determine the price terms of bank loans," said Douglas Watson, managing director of the energy, communications, and speculative-grade group at Moody's.
