Bad Paper

A month after it was reported that Moody’s Investor Services had erroneously rated Constant Proportion Debt Obligations (CPDOs) as triple-A, Standard & Poor’s has disclosed that it has found an error in their CPDO ratings model. However, S&P has indicated that their glitch has not affected the ratings on the bonds.

“We discovered one error in a trial version of one of our models that was used in connection with the initial ratings on five public CPDOs and briefly used for surveillance analysis. This error did not result in a ratings change and was caught and remedied by our ratings process. In the interest of full transparency and openness, S&P has disclosed this situation to the SEC,” reported a statement from Vickie Tillman, executive vice-president at S&P.