S&P to pull ratings on debt linked to stocks or commodities

By Susanna Moon

Chicago, Dec. 10 - Standard & Poor's said it will begin withdrawing ratings for market-linked notes on March 31.

Market-linked notes are obligations with variable principal payments linked to commodity prices, equity prices or indexes based on either commodity or equity prices, according to an agency release.

The agency said it is reviewing its practice of rating the notes "to terms" due to the increasing complexity and growing volume of the notes issued as general obligations of financial institutions.

"The severe turbulence in global debt markets since the summer of 2007 draws even greater attention to demands for clarity in disclosure, including for credit ratings," the agency noted in a release.

The agency said it historically rated equity- or commodity-linked notes based on the likelihood that principal would be paid according to the terms of the instrument even though those payments were variable based on the performance of the linked equities or commodities.

Thus the obligations' ratings reflected the agency's opinion of the creditworthiness of the issuer, but not the potential market risk present in the terms of many of these instruments, S&P said.

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