Question

Required:Problems in bond ratings and the firms issuing them have led to both Moody’s as well as Standard and Poor’s to continue modifying their ratings criteria. Utilize the analytics Moody’s applies to the packaged goods industry including any metrics that help in identifying and applying both the qualitative and quantitative criteria noted in the Moody’s Report on this Industry. To answer questions also use Campbell's 10K.  

1. Why is it necessary for Moody’s to apply different weights for these factors? How are the factors measured?

2. Explain the five key factors and related sub factors important to Moody’s in assessing credit ratings for the industry.

3. Utilizing the information in the 10K for Campbell Soup discuss the individual factor and sub factor mapping results using the company’s own data and state your estimation for the rating for each one. You do not have to calculate a composite score for the overall rating.

4. What are some of the assumptions, general limitations and other considerations noted by Moody’s in employing this methodology? Are accounting adjustments an issue for Moody’s in applying their criteria?

Answer 1

1. It is important to apply different weights for these factors as credit ratings are never static and they change everytime time based on the latest and the newest data. One Negative debt has the capacity to lessen the best credit score. Hence, Proper weights needs to be applied. The factors are measured based on the industry and accordingly the weights are applied.

2. Key factors in assessing credit ratings for the industry include:

(a) Payment History - 35%

(b) Amounts owed - 30%

(c) Length of Credit History - 15%

(d) New Credit taken and accounts opened recently - 10%

(e) Types of credit being used currently -10%