Moody’s Investors Service is planning changes to the way it rates collateralized debt obligations backed by project finance and infrastructure assets that could result in downgrades for one or two of these deals.

The proposed changes concern the update and additional standardization of the correlation and recovery assumptions. The rating impact on existing transactions will be limited to a one-notch downgrade.

Moody’s is asking interested parties to comment on the proposed changes, which are published on its website. It will finalize the modeling assumptions after we taking any responses into account. Comments are due by Sept. 16.

Project finance CDOs invest in a range of assets including the debt of public private partnership/private finance initiatives, regulated utilities, renewable energy projects, and large infrastructure- and power-related sectors. The eligibility criteria in recent transactions have included a broader range of assets than some older deals.

There are currently five such transactions outstanding that are rated by Moody's; three are cash flow collaterlized loan obligations and two are synthetic CDOs. These transactions have a combined notional value of approximately €3.4 billion

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