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Credit FAQ: Key Considerations For March 2023 Updates To CDO Evaluator Industry Codes

S&P Global Ratings' CDO Evaluator asset types codes are expected to be updated on March 17, 2023.

We are publishing this article to address queries we've received from collateralized loan obligation (CLO) market participants regarding the changes to the industry codes.

Frequently Asked Questions

What is changing?

The CDO Evaluator asset type codes will be updated to reflect the current market and provide increased transparency and relevancy. The key changes include the addition of new asset types and the discontinuation of two asset types.

The new asset types that will be added include:

  • Residential real estate investment trusts (REITs);
  • Industrial REITs;
  • Hotel and resort REITs;
  • Office REITs;
  • Health care REITs;
  • Retail REITs; and
  • Specialized REITs.

The asset types that will be removed include:

  • The Internet and Direct Marketing Retail - 4420000; and
  • Thrifts and Mortgage Finance - 7020000.
When do the changes go into effect?

The changes will take effect on March 17, 2023. At that time, any live data feeds from S&P Global Inc. will reflect the updates.

Why are the CDO Evaluator asset types changing?

The Global Industry Classification Standard (GICS) industry classification system is updated periodically to reflect market changes and to keep the classification system current. We do not expect the classification system to change often; the last update was on Sept. 26, 2018. Since our asset type classifications are in line with the GICS classifications, we are updating our asset types to reflect the changes that are being made to the GICS classifications.

Which new codes will affect CDO Evaluator?

The new codes to CDO Evaluator are limited to REIT-related industries, which should have little to no exposure in CLO portfolios.

Which codes currently used by CDO Evaluator will be discontinued?

The Internet and Direct Marketing Retail - 4420000 and Thrifts and Mortgage Finance - 7020000 asset types will be discontinued. Obligors that were classified under these codes will be reclassified under other existing industry classifications.

Has the CDO Evaluator model been updated to refer to the new codes? Can I map the old CDO Evaluator industry codes directly to the new codes?

We are working to update the CDO Evaluator model to incorporate the changes in the near term. However, the changes to the CDO Evaluator model and its industry classifications are not happening simultaneously with the industry changes, so there will be some delay in the release of the updated model. In the meantime, please refer to the mapping in table 1 to use the current model versions with data from ratings information feeds after March 17, 2023.

Table 1

Code Mapping
New code Temporarily replace with
9622292 – Residential REITs 1033403 – Mortgage Real Estate Investment Trusts (REITs)
9622294 – Industrial REITs 1033403 – Mortgage Real Estate Investment Trusts (REITs)
9622295 – Hotel and Resort REITs 1033403 – Mortgage Real Estate Investment Trusts (REITs)
9622296 – Office REITs 1033403 – Mortgage Real Estate Investment Trusts (REITs)
9622297 – Health care REITs 1033403 – Mortgage Real Estate Investment Trusts (REITs)
9622298 – Retail REITs 1033403 – Mortgage Real Estate Investment Trusts (REITs)
9622299 – Specialized REITs 1033403 – Mortgage Real Estate Investment Trusts (REITs)
Do I need to get a new version of CDO Monitor for my existing CLO? If I use the non-model approach, does anything change?

For existing CLOs that choose not to conform to the updated industry classifications, no action is required. Transactions that opt to conform to the updated industry classifications after March 17, 2023, will need a new CDO Monitor application if they use the model-based approach. We are currently making the necessary updates to the model, which we expect to be available in the near term. Transactions currently using the non-model approach will need to make a small update to the way they calculate the non-model CDO Monitor results. Specifically, in the industry diversity measure (IDM) that goes into the scenario default rate (SDR) calculation, the asset types used to calculate such IDM would need to be updated. Industry codes to be used for such calculation are typically listed in an Appendix or Schedule and would need to be updated as mentioned below.

The below industries should be removed:

  • Internet and Direct Marketing Retail – 4420000; and
  • Thrifts and Mortgage Finance – 7020000.

The below industries should be added:

  • Residential REITs – 9622292;
  • Industrial REITs – 9622294;
  • Hotel and Resort REITs – 9622295;
  • Office REITs – 9622296;
  • Health care REITs – 9622297; and
  • Retail REITs – 9622298.

Please note that the calculation of the IDM itself remains unchanged but the industry codes going into such calculation will change.

Do you expect the changes to the codes that affect CDO Evaluator to have a significant impact on industry concentrations in CLO portfolios?

For the two asset types being discontinued, there is little to no exposure in S&P Global Ratings-rated global CLOs, and we expect minimal exposure to the new REIT-related asset types that will be added. Consequently, we expect no ratings impact to our rated CLOs and no impact to portfolio diversification due to these changes.

Related Research

  • Revisions To The Global Industry Classification Standard (GICS®) Structured Effective MarchSTRUCTURE EFFECTIVE MARCH, 2023 By S&P Dow Jones Indices And MSCI Inc., March 31, 2022;

This report does not constitute a rating action.

Primary Credit Analysts:Jimmy N Kobylinski, New York + 1 (212) 438 6314;
Emanuele Tamburrano, London + 44 20 7176 3825;

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