This publication outlines what to expect from the typical rating process when working with S&P Global Ratings' U.S. Public Finance (USPF) group and presents responses to frequently asked questions about the rating process, to provide transparency and comfort for new and frequent issuers. USPF is active in the following sectors: state and local government, transportation, utilities (water, sewer, public power), higher education, charter schools, health care, and housing. Through our ratings, we provide independent essential intelligence that investors can use to assess creditworthiness, compare different issuers and securities, supplement their own credit analysis, and meet investment guidelines. Our criteria for evaluating issuer creditworthiness and various types of debt are publicly available in the "About Ratings" section at www.spratings.com and our analysts are accessible and responsive throughout the rating process.

A Rating From S&P Global Ratings

The credit rating S&P Global Ratings assigns is a forward-looking opinion about the issuer's capacity and willingness to meet its financial obligations in full and on time. It incorporates our views on the relative likelihood of default of entities (issuers) and securities (issues). We strive to be globally comparable across sectors and regions, with the key objective of our credit ratings being a rank ordering of the relative creditworthiness of issuers and obligations using our unique rating scale. Of note, and a difference from some other ratings assigned by S&P Global Ratings, a USPF rating does not factor post-default recovery into the rating.

A rating is one of many tools available to market participants, but it is not a guarantee of credit quality, a measure of absolute default probability, investment advice, or an audit. We evaluate issuers based on credit fundamentals and issues/series of bonds on security type, pursuant to the applicable criteria. In general, we consider economic fundamentals or demand and market position, institutional or legal frameworks, debt burden, budgetary flexibility (or reserve levels), financial performance, and management, among other indicators.

Our rating scale spans 21 distinct ratings from 'AAA' (which we define as extremely high capacity to meet financial commitments) to 'D' (default). Anything in the 'BB' category or below is speculative grade. Most, but not all, of our ratings in USPF are in the mid-to-high investment grade categories, but the USPF universe of ratings runs the credit spectrum. Issue credit ratings can be either long-term or short-term. Short-term issue credit ratings use a six-rating scale of A-1, A-2, A-3, B, C or D.

Municipal short-term note ratings, typically associated with bond anticipation notes (BANs) or revenue anticipation notes (RANs), use a different scale than our long-term ratings or our short-term issue credit ratings. These note ratings reflect our opinion about the liquidity factors and market access risks unique to the notes. With the short duration of notes, there are only four rating categories ('SP-1+', 'SP-1', 'SP-2', and 'SP-3'). The 'SP-3' rating is speculative grade, while the others are investment grade. For complete information regarding all our rating definitions along with a discussion of what kind of risk dimensions our credit ratings address, see "S&P Global Ratings Definitions," published Nov. 10, 2021.

The Typical Rating Process

In USPF, most of our ratings are issue credit ratings, which we assign to a specific bond series, but we can also assign the broader issuer credit rating (ICR) to the entity itself, which reflects the general creditworthiness of the issuer. We only provide a rating when we have adequate information to form a credible opinion and typically only assign ratings on request. For more information on what constitutes adequate information, please see "How Quality And Timeliness Of Information Are Incorporated Into U.S. Public Finance's Rating Process," published Dec. 6, 2021.

After we receive a rating request, we assign a team of at least two analysts with knowledge of the specific sector and security type (see graphic). The analysts coordinate with the issuer or its designee (typically a municipal advisor or an investment banker) and have a phone or video conference call or in-person meeting.

Before the meeting, the primary analyst will request a variety of documents, including, for example, the most recent audit, the offering statement, the budget, quarterly financial statements, long-term financial and capital plans, financial management policies, and in some sectors a completed questionnaire requesting other relevant data not reported publicly. For issuers new to S&P Global Ratings, the initial document request could be larger, including multiple years of audits. When assigning and maintaining ratings, we consider whether the information we have on hand is timely and sufficient in terms of quality and quantity to support a credit opinion.

If the rating is covered by SEC Rules 17g-5 and 17g-7 (which in USPF typically only applies to select housing group transactions securitizing a fixed pool of assets), certain disclosures must be made publicly accessible through S&P Global Ratings' Rule 17g-5 website. S&P Global Ratings is also required to report on the transaction's representations, warranties, and enforcement mechanisms, compared with our benchmarks, in accordance with SEC Rule 17g-7. An S&P Global Ratings relationship manager can assist clients with regulatory requirements once we receive the rating request.

Once analysts have received and reviewed the information, they provide a list of discussion topics that will be covered during the management meeting. Rating calls are generally scheduled for an hour, but can be longer or shorter, as needed. For first-time issuers, we usually take more than an hour, as often we do not yet have familiarity with the issuer and will likely have more extensive information requests than for a frequent issuer.

After the management meeting, the analysts prepare to present to a rating committee. The committee includes the primary analyst, the backup analyst, and several other analysts, and is led by a chairperson. The responsibility of chairing a committee is only granted after many years of relevant experience. Committees are composed of analysts with sector and regional knowledge, which promotes consistency across regions. The committee, using the appropriate sector and security criteria, discusses the attributes of the issuer's credit quality, and determines the rating and outlook (stable, positive, or negative). The primary analyst will recommend a rating for discussion, but that does not determine the rating. A vote of all eligible voters is needed for rating assignment. It is within the committee that the "credit story" is communicated and discussed in depth.

After the committee determines the rating, the primary analyst will communicate the rating to the issuer (or its designee) and highlight key points of discussion that led to the rating outcome. After notification of the rating outcome, the primary analyst will send a draft rating report to the issuer to review before publication. This review is not for editorial purposes, but to give the issuer the opportunity to identify anything included in the report that it considers to be a factual error, misleading statement, or an inadvertent disclosure of confidential information. The issuer will have at least two hours to review the report, and the team will coordinate a time for review that works for everyone. After we receive and evaluate the issuer's feedback, and incorporate it as we see fit, we release the rating and publish the report. We typically prefer to publish the report within the same business day as we provide the draft, so that confidential information is not outstanding overnight.

The rating relationship continues after the credit report is published and the rating is shared with the market. S&P Global Ratings has an obligation to the market to maintain a current rating. In order to do this, the issuer is required to provide updated information through the life of the bonds. The S&P Global Ratings' team will review all provided info and from time to time might contact the issuer with questions or to schedule a surveillance update focused management meeting. Ratings are dynamic. The surveillance process could lead to rating, outlook, or CreditWatch changes.

FREQUENTLY ASKED QUESTIONS

How does S&P Global Ratings assign analysts?

We assign analysts based on knowledge and availability. We do not accept external requests for specific analysts. We value the knowledge accumulated by our analysts covering a single issuer for a long time; however, we limit the time that analysts can serve as primary analysts for a particular issuer. S&P Global Ratings also requires a "cooling-off" period once an analyst reaches the time limit before he or she can be assigned to that issuer again.

How do I prepare for the rating process?

Issuers can review relevant published criteria as well as issuer-specific questionnaires before the rating call. Providing bond documents and management policies prior to the call is also helpful because analysts' questions can be more specific to the issue and issuer.

Who should participate on the rating call?

From our perspective, the issuer is welcome to include all individuals who are best suited to speak to the credit attributes of the obligor or transaction and address the analysts' questions. In our experience, participants have often included the finance director/CFO, treasurer/controller, budget director, and debt manager, as well as other senior leadership specific to the organization such as university presidents, school district superintendents, city managers, etc. The issuer also often invites its financial advisor or investment banker to the call. The number of participants can vary greatly, but for us, it does not matter how many people are involved, just that the right people are there.

When should we think about requesting a site visit?

If we have an opportunity to review the pertinent information and ask questions as needed, we can complete a rating without a site visit. In certain cases, site visits could be scheduled for a new issuer, or an existing issuer that has had a notable change (either positive or negative) in credit conditions or management personnel. Issuers can also come to any of our offices for meetings. We remain flexible as to the location and type of meetings.

How long does the rating process take?

This can vary depending on the issuer/issue's complexity, the availability of information, and the time since the most recent rating review. In general, we require at least 10 business days from the time of the request to provide the rating, although complex issues might require more time and for those transaction turnaround time will be assessed on a case-by-case basis.

Can I observe or participate in the rating committee?

Rating committees are not open to the public. In fact, committees are not open to any individuals outside of S&P Global Ratings. Only analysts who "need to know" participate; analysts from other departments, operations or commercial employees cannot participate.

How does S&P Global Ratings determine the final rating?

We will evaluate the issue and issuer credit factors in accordance with the appropriate criteria. We determine ratings by majority vote of a rating committee through careful evaluation of the credit factors. The committee will also consider how the issuer compares with regional and national peers.

What is the difference between an outlook and a CreditWatch?

All long-term ratings have outlooks, and the outlook period is generally up to two years for investment grade ratings and up to one year for speculative grade ratings. Outlooks present S&P Global Ratings' opinion of possible changes to an issuer's credit quality during the outlook period generally and are not specific to any unexpected events that might arise. A stable outlook means we do not expect the rating will change within the outlook period, while a negative or positive outlook means we believe there is at least a one-in-three chance that the rating could change within the outlook period.

We place ratings on CreditWatch when an unanticipated event or deviation from an expected trend occurs and we need additional information before making a rating change. We could also place a rating on CreditWatch if available information does not meet our quality and timeliness of information standards. A CreditWatch placement means that we believe there is at least a 50% chance the rating could change within 90 days, although we can extend this timeframe when an event is still pending or more information is still required. A rating on CreditWatch does not carry an outlook during the CreditWatch review period. The CreditWatch can be negative, developing, or positive, depending on the event and its expected impact on credit quality.

Not all rating changes are preceded by a non-stable outlook or CreditWatch action. And not all non-stable outlooks and CreditWatch actions result in rating changes.

Can I ask for advice from the S&P Global Ratings analyst?

Simply put, no. Analysts cannot advise the issuer about what steps it should or could take to achieve a certain rating level or an upgrade or prevent a downgrade. Analysts can, however, discuss with issuers the credit rating rationale and the rating factors that might support or limit the rating. Similarly, analysts can engage in discussions around the application of criteria.

Can I appeal my rating?

Yes. If you think the criteria were applied in error, either due to analytical mistake or oversight, or if you have materially new information to share, you may file an appeal. We will consider all appeals and will grant such requests as appropriate. We could place the rating on CreditWatch during the appeal period. We take any appeal request seriously, but will reject requests that appear to be made solely for delaying the publication of the rating. In general, the rating decision of an appeal rating committee is final. Only a rating change can be appealed; rating affirmations, CreditWatch actions, and outlook changes cannot be appealed.

If we need to cancel or postpone the issuance for any reason, how long is the rating valid?

This is determined on a case-by-case basis and depends on credit conditions, disclosure updates, and other factors that might be relevant.

How often does S&P Global Ratings review and update ratings?

We review ratings regularly, but at least annually, through our surveillance process. We expect timely financial information will be provided by the issuer. As part of the review process, we might contact issuers for additional information, especially if there is a notable shift in relevant credit factors. We strive to have our ratings timely, relevant, and forward looking to inform investors of any perceived or actual changes to credit quality and will often publish a report following analytical review.

Who should I contact if I have a question about costs or other products?

Any questions about fees should be directed to a relationship manager. For fee quotes or more information, please email pffeesvcs@spglobal.com. S&P Global Ratings maintains a strict separation of commercial and analytical activities. Analysts are forbidden to discuss fees with the issuer or any other party.

What is the USPF organizational structure?

We maintain a "Meet the Team" document on www.spratings.com in the public finance section. All our emails and phone numbers found there are direct. Included in this document is a list of relationship managers and the regions they cover.