Our Approach
Our expected-loss methodology is purpose-built for project finance, recognizing that projects may face impairment or restructuring while continuing to operate. By focusing on economic value rather than only on default probability, our ratings are less sensitive to leverage and short-term cashflow volatility and more closely aligned with actual recovery outcomes.
Accuracy: Our expected-loss approach combines probability and severity of default with a strong focus on recovery. Leveraging the historically robust recovery performance of project finance, we tailor our analysis to each project’s specific cashflows and instrument structure to deliver precise and reliable credit assessments.
Granularity: Our framework breaks down risk into 16 defined credit impairment events across five core areas, supported by detailed guidance. We benchmark event probability and severity across sectors, ensuring consistent, transparent analysis across all infrastructure transactions.
Flexibility: The framework is adaptable across a wide range of structures and instruments – whether classic project finance, corporate hybrids, or varying levels of seniority – without relying on rigid metrics, caps, or ceilings. This ensures balanced, transaction-specific analysis across diverse deal types.
Transparency: We clearly identify the drivers of expected loss, using probability-tree diagrams to display risk exposure and severity – providing investors with actionable, data-driven insights.
