Standard & Poor's is requesting comments on its proposed update to its criteria for rating cash flow and synthetic collateralized debt obligation (CDO) transactions backed by structured finance securities.

In its proposal, the rating agency explained that it will apply the same basic criteria currently used in rating CDOs of corporate debt, but with some differences driven by the characteristics of SF assets.

If adopted, the updated criteria would apply to all new and existing corporate CDOs of SF and would  likely cause downgrades to existing transactions by one or more rating categories.

"The level of change would be primarily driven by the ratings on the assets relative to the rating on the CDO liabilities," explained the rating agency." The lower the ratings on the assets, relative to the existing rating on the CDO of SF liabilities, the larger the downgrade we would expect under the proposed criteria. However, some transactions with liabilities already rated in the 'CCC' rating category will likely not be highly affected by these changes."

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