Structured Finance Rating

Structured finance instruments are a relatively complex form of debt, meant to mitigate risk using various assets. PACRA’s assessment begins with the profile and background of the originator – the entity that requires financing. The nature of the unique underlying assets along with their associated cash flows using a data heavy approach is taken into consideration, followed by analysis of the payment and recovery risk. Usually, a “preliminary rating” is assigned first. Subsequently, when the transaction is legally formalized, the legal documentation is reviewed to incorporate the credit and legal implications of the transaction structure to arrive at the “final rating”.