Rating Evaluation Service (RES)
Assess the impact of new initiatives on creditworthiness with a forward-looking, confidential assessment.
What is a Rating Evaluation Service?
The decision to take on a major capital program, manage debt capacity, change an operating structure or vary the mix of security types issued can potentially have significant credit consequences.
Our Rating Evaluation Service (RES), a tool for rated or unrated entities, provides a forward-looking, confidential assessment of the potential credit impact of your proposed strategic initiatives before you implement them. You provide us with the hypothetical scenarios you are considering and we'll provide you with timely feedback on each scenario you present.
The Rating Evaluation Service (RES) is not a credit rating, nor is it a consulting or advisory service.
Benefits
One solution, many uses
Understand the Impact of Your Proposed Initiatives on Your Creditworthiness
When exploring strategic options, you may want to assess ahead of time how your proposed initiatives may affect your creditworthiness. The decision to take on a major capital program, consider an acquisition, manage debt capacity, change an operating structure or vary the mix of security types issued can potentially have significant credit consequences. That’s where we can help.
Obtain Useful Feedback and Gain Valuable Insight Before You Act
Our Rating Evaluation Service gives you a confidential assessment of the potential credit impact of your proposed strategic initiatives before you implement them, to identify the planned initiatives that potentially could lead to credit outcomes that you would view as more or less favorable. This can be a particularly valuable benefit whether you are considering only one plan or several alternatives.
Analysis Based on Your Scenario
Provide us with the hypothetical scenarios you are considering and we'll provide you with timely feedback from a Rating Evaluation Committee based on each scenario you presented. Please note that the Rating Evaluation Service process and outcome remains confidential.
Uses of a Rating Evaluation Service
Rating Evaluation Service has been used to gauge the potential ratings implications of important initiatives such as:
- Mergers and acquisitions
- Asset or line-of-business divestitures
- Capital plan alternatives and/or additional debt being contemplated
- Funding and liquidity mix restructurings
- Recapitalizations (including senior and subordinated debt)
- Creation of new holding and subsidiary company structures
- Risk-shedding and capital-relief transactions (securitizations, hybrids, derivatives, and reinsurance)
- New financing techniques, such as a commercial paper program
- Pre-packaged or pre-emergence bankruptcy alternatives
Credit Impact Analysis through RES
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Overview
How could a RES provide a Credit Impact Analysis?
A credit impact analysis is a structured evaluation of how a borrower’s ability and willingness to meet financial obligations could change under specific events, strategies, or external conditions, and what that could mean for overall credit risk and possible rating sensitivities.
S&P Global Ratings’ Rating Evaluation Service (RES), has been used to assess how business plans (e.g., M&A, refinancing, capex programs, shareholder distributions, asset sales, restructuring) and macro developments (rates, inflation, commodity cycles, regulation, geopolitics) may impact potential credit outcomes.
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Core Components
Core Components (Quant + Qual) and How RES Applies Them
RES credit impact analysis combines quantitative and qualitative inputs to build a forward-looking credit view:
Issuer fundamentals (“capacity” to repay)
- Projected earnings and cash flow, debt service capacity, leverage and coverage, working-capital needs, capex intensity, financial flexibility, etc.
Financial policy and governance (“character” in a credit sense)
- Management’s track record and stated priorities (deleveraging vs. growth vs. distributions), tolerance for leverage, appetite for acquisitions, transparency/discipline around targets, etc.
Capital structure and loss severity (“capital/collateral” where relevant)
- Debt mix and subordination, maturity profile, secured vs. unsecured layering, structural subordination, covenant headroom, liquidity sources and uses, refinancing risk, etc.
Operating and external environment (“conditions”)
- Sector dynamics, competitive positioning, customer and supplier concentration, regulatory and legal constraints, macro sensitivity (rates, FX, demand, input costs), etc.
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Applications
Potential Applications of a RES for Credit Impact Analysis
A Rating Evaluation Service supports different views of credit impact that often intersect. RES credit impact analysis can be used to support:
- Corporate credit impact (issuer / transaction-level): evaluates how corporate actions or shocks could affect the issuer’s credit profile and potential rating trajectory, e.g., debt-funded acquisitions, refinancings, asset disposals, large capex programs, or changes in financial policy.
- Portfolio impact analysis: for lenders and investors, credit impacts often concentrate at the portfolio level through correlated exposures, sector concentrations, and common macro drivers. In responsible finance contexts, this is increasingly paired with sustainability considerations—for example, assessing whether exposure to certain sectors increases transition risk, litigation risk, or reputational risk, and how portfolio characteristics compare with stated sustainability priorities.
- Economic / macro impact analysis (systemic drivers): evaluates how broader conditions—interest-rate shifts, inflation regimes, commodity shocks, geopolitical conflict, or policy changes—could influence credit performance across sectors and borrower types.
Risk ratings/rating sensitivities: an articulation of key drivers and indicative thresholds that have historically been associated with pressure or support.
- Financing and transaction decisions: informing internal considerations around transaction structuring, potential mitigants, and risk trade-offs.
RES in Action
Watch our short video to learn how a Rating Evaluation Service is typically used to evaluate the impact of restructurings, mergers & acquisitions, divestitures, or material changes in debt or capital structure.
M&A: Credit Impact and Risk Assessment through RES
Mergers & acquisitions (M&A) can be a step-change event for credit quality, often reshaping leverage, cash flow stability, business risk, liquidity, and financial policy at once. S&P Global Ratings’ Rating Evaluation Service (RES) is a written assessment that helps entities understand potential credit considerations and rating sensitivities under defined assumptions of a proposed initiative. The service provides confidential, written analytical feedback on hypothetical scenarios and their potential credit considerations. RES provides analytical perspective on M&A‑related credit risks and other important initiatives as they relate to creditworthiness:
Risk Identification (Early “Red-Flag” Screen)
Where could credit weaken quickly, e.g., debt-funded consideration, pro forma leverage jump, refinancing needs, or reliance on cost synergies to maintain metrics?
Focus Areas (What Matters for Credit)
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Legal
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Financial
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Operational
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Mitigation
Legal, Regulatory & Compliance Risk
Litigation, antitrust approvals/timing, environmental liabilities, licensing/permits, and jurisdictional constraints.
Cultural & human-capital risk: retention of key leaders and technical talent, labor relations, and execution capacity to deliver synergies without destabilizing operations, etc.
Strategic risk: does the deal impact scale/diversification/competitive position enough to offset incremental financial risk?
Financial Risk
Quality of earnings/cash flow, working-capital dynamics, off-balance-sheet obligations, pension/retiree liabilities, tax exposures, and downside resilience.
Operational & Technology Risk
Supply-chain fragility, IT systems integration, cyber posture, operational disruption risk, and capex requirements, etc.
Potential Considerations Relevant to Credit Ratings
For many issuers, the central question is whether a transaction creates a temporary leverage shock or a durable shift in financial policy. RES helps frame that question with scenario-based analysis, supporting internal discussions by providing a clearer analytical view of potential credit considerations.
Videos
Adjusting to a Variety of New Challenges
Could our Rating Evaluation Service help you to adjust to new challenges? Watch our video to learn more.
Strategic Decisions
Learn how a Rating Evaluation Service can support your strategic decisions providing you with the insights you need, before you act.
Portfolio Acquisition
Are you looking to sell or acquire a portfolio but you want to understand the cost of funding, learn how a Rating Evaluation Service could assist.
Securitization Restructuring
Our Rating Evaluation Service could provide you with the insights you need when considering your next securitizations restructuring.
Contact Us
Learn more about our Rating Evaluation Service (RES)
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