The proposed updated methodology can be downloaded here.

The CRE loan and CMBS Rating Methodology complements the General Structured Finance Rating Methodology and should be read in conjunction with the Counterparty Risk Methodology.

The proposed changes are expected to affect existing ratings assigned by Scope up to two notches on the upside and four notches on the downside.

Summary of the proposed key changes

This proposed update includes the following adjustments:

1. An alignment of the relationship between probability of default and expected loss with that in our General Structured Finance Methodology.
    
2. Amendments to our all-in refinancing rate framework
    
3. The introduction of a scoring framework for determining assumptions and the rateability of construction and refurbishment CRE transactions
    
4. A clarification of how we incorporate inflation into the rating analysis
    
5. A clarification of how we incorporate interest rate risk into the rating analysis
    
6. An update of our liquidity coverage expectations
    
7. Updates of our illustrative rental value haircuts, property and vacancy costs and capitalisation rates
    
8. An amendment of our foreclosure assumptions
    
9. An update of our sensitivity analysis
    
10. The deletion of the appendix regarding the CRE loan and CMBS data template
     
11. An amendment of our CRE loan and CMBS data guidelines
     
12. The introduction of a glossary as well as editorial changes to enhance clarity
     
13. Editorial changes

Call for comments

Scope invites issuers, investors, and other interested parties to comment on the methodology by 19 October 2023 as part of the agency’s ongoing commitment to transparency and an open dialogue with market participants.

Scope will review and publish the content of written responses in accordance with regulatory requirements unless the respondent has specifically requested confidentiality.

Please send your comments to consultation@scoperatings.com.