S&P Capital IQ announced the launch of PD Model Fundamentals – an innovative tool used to assess the probability of default (PD) of public and private companies.  PDs produced from this tool enable users to screen and identify companies with a higher likelihood of defaulting in the short- to medium-term.

PD Model Fundamentals uses a combination of financial ratios and macroeconomic factors to assess credit risk for global public and private companies.  A unique feature of the tool is that it generates two PDs for each company – one for financial risk and one for business risk – that are then rolled into one single PD reflecting the company’s overall creditworthiness.  A company may look stable from a numbers perspective (i.e., financial risk), but may be weak based on country/industry risk or their relative competitive position (i.e., business risk), or vice versa.  Having these two measures enables users to dig deeper into potential problems and understand their origins. The quantification of business risk factors is possible with S&P Capital IQ’s unique data set of coverage for hundreds of thousands of public and private companies, which includes both financials and market intelligence on diversification, market share, ownership or management.

The PD Model Fundamentals offering complements a broad array of tools offered by S&P Capital IQ for complete coverage of short-term, mid-term and long-term views of credit risk.  This includes PD Model Market Signals that provides daily estimates of default and CreditModel, a quantitative tool that uses financial statement information to create long-term credit scores akin to fundamental credit risk analysis. These models seamlessly integrate a company’s proprietary data with public and private company data available on the S&P Capital IQ platform. Users can automatically produce measures of credit risk for hundreds of thousands of public companies – which include more than 99% of global market capitalization – and private companies stored in a pre-calculated credit scores database. User applications enable clients to score any company, conduct sensitivity analysis or check the impact of stressed scenarios by using Excel® Plug-in. Users can choose from an array of distribution channels including web services, data feeds and the S&P Capital IQ desktop.

Source:  S&P Capital IQ

Perhaps this means goodbye to credit reports on financial and business risk as we know it, replaced by predictive defaults (PDs)