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We are always interested in speaking to members of the media on news and events affecting the world of corporate credit risk. We look forward to hearing from you.
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For Immediate Release
Moody's KMV™ Releases RiskCalc™ Model for Measuring Default Risk of Korean Private Firms, Adding Thousands More Companies To Credit Opinion Coverage
Risk Management Firm Forms Alliance with Korea Information Service, Inc. to Distribute Product in Korea
SAN FRANCISCO, July 15, 2003 - Moody's KMV™, the world's leading provider of quantitative credit risk products for lenders and investors, today announced the release of Moody's KMV RiskCalc™ for Korean Private Companies, a Web-based model for estimating the probability of default or Expected Default Frequencies™ (EDF™) on obligations of non-financial Korean private companies.
RiskCalc Korea joins the Moody's KMV RiskCalc suite of quantitative credit risk models for private firms and can be used alone or with other RiskCalc models to benchmark, underwrite or price private company debt, and to assist in securitizing portfolios of private firm debt.
"This is an important addition to our globally consistent network of locally validated risk assessment models,"said Doug Woodham, president of Moody's KMV. "RiskCalc now provides information on private firms in over sixteen countries worldwide, including three in Asia, and it provides the global lending community and corporations with an unrivalled risk management tool that can be used to benchmark risk for a single company or manage the credit risk of an entire portfolio."
Moody's KMV also announced that it has formed a strategic alliance with Korea Information Service, Inc. (KIS) to undertake a joint effort to commercialize and market RiskCalc Korea and other Moody's KMV products in Korea. KIS is one of Korea's largest data vendors and risk rating solution providers, with over 90 percent market share for the development of Internal Ratings systems for Korean banks.
"We're excited to form this partnership with KIS," Woodham said. "With Moody's KMV's expertise in quantitative modeling and KIS' local marketing capabilities, the alliance will allow us to provide world-class risk management solutions for banks and other financial institutions throughout Korea."
According to Mr. Woodham, the joint development and release of RiskCalc Korea underscore the Moody's KMV commitment to the Korean market. "We view Korea as a key economy in Asia given the growing activity of the fixed income and derivative markets there. RiskCalc EDFs help determine whether a prospective borrower meets credit-underwriting standards, whether the current spread on loans is sufficient to add shareholder value, whether loans should be kept on or off balance sheet, and whether capital attribution levels are appropriate.
The Korean model is calibrated to the attributes of the Korean economy, using data from an historical database of more than 32,000 Korean private firms, of which nearly 3,300 had defaulted. It uses 13 financial statement values to reflect a firm's profitability, gearing, debt coverage, liquidity, activity levels and sales growth, with adjustments for industry sector and firm size. Moody's KMV chose the ratios for each category on the basis of their stand-alone ability to predict default and for their behavior within a multivariate model. They were then transformed to produce one-and five-year EDFs that are also mapped to Moody's Investors Service's historical bond default rates.
"The release of the product is especially timely, given expected changes in banking regulation based on the Basel II accords," said Dr. Jeff Bohn, Managing Director at Moody's KMV. "One of the key aspects of Basel II is the measurement of credit risk, with banks being encouraged to differentiate borrowers and categorize their book exposures based on risk. The approach (for corporate, bank and sovereign exposures in particular), involves estimation of the probability of default, loss given default and expected exposure at default, all applications for which RiskCalc is well suited."
In addition to Korea, Moody's KMV has released RiskCalc models calibrated for private firms in the U.S., Canada, Mexico, Australia, Japan, the UK, Germany, France, Spain, Belgium, Italy, Netherlands, Austria, Portugal and the Nordic countries. The RiskCalc network of models is becoming a global standard for default probability credit ratings. The standard is enabling companies to establish consistent credit assessments that are important for the development of a secondary market for private firm commercial debt, as well as securitizations backed by commercial debt such as Collateralised Debt Obligations. As a result, the ability of banks to trade assets that are now largely illiquid is greatly increasing.
Moody's RiskCalc for Korean private companies is available via the Moody's KMV Web site, www.moodyskmv.com, allowing clients to determine EDF credit measures for large middle-market portfolios quickly and efficiently.
About Moody’s KMV
Moody’s KMV, a wholly owned subsidiary of Moody's Corporation, is the world’s leading provider of quantitative credit risk analysis tools to lenders, investors, and corporations. Moody’s KMV's tools provide current default probabilities, recovery estimates, valuations and correlations, and are widely used to assess portfolio risk/return. Serving over 2,000 clients in 80 countries, including most of the world's 100 largest financial institutions, Moody’s KMV maintains the largest and cleanest database of corporate defaults in the world. In addition to its San Francisco headquarters, Moody’s KMV has offices around the world to serve its global customer base.
About Moody's Corporation
Moody's Corporation (NYSE: MCO) is the parent company of Moody's Investors Service, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, and Moody's KMV, the leading provider of market-based quantitative services for banks and investors in credit-sensitive assets serving the world's largest financial institutions. The corporation, which reported revenue of $1.2 billion in 2003, employs approximately 2,300 people worldwide and maintains offices in 18 countries. Further information is available at www.moodys.com.
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