CDO war moves up a notch

Rating agencies are once again in the spotlight. The firms are battling each other over the practice of notching collateralised debt obligations. What does notching mean for investors and issuers? Paul Lyon reports

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At the end of March, rating agency Fitch shocked the securitisation world by releasing a study accusing its rivals, Moody’s Investors Service and Standard & Poor’s (S&P), of suppressing competition in the rating of collateralised debt obligations (CDOs). Fitch says three-quarters of senior structured finance executives oppose notching. This is where a rating agency, when it is developing an overall rating for a CDO, automatically adjusts downward the ratings on bonds and loans included in

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