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; https://www.msci.com/documents/1296102/29559863/GICS_Structure_Change_Doc_31_March_2022.pdf/d2437e6d-9ae5-0bad-c758-9e2a5f917a69?t=1648760449996
This report does not constitute a rating action.
| Primary Credit Analysts: | Jimmy N Kobylinski, New York + 1 (212) 438 6314; jimmy.kobylinski@spglobal.com |
| Emanuele Tamburrano, London + 44 20 7176 3825; emanuele.tamburrano@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.