Bangkok--Jan 31--Aziam Burson Marsteller
Lehman Brothers, the global investment bank, today announced a change to the inclusion rules for its market-leading Global Family of Indices. Beginning July 1, 2005, Fitch ratings will be used, in addition to those from Moody's and S&P, when calculating the index quality assigned to individual securities.
The new classification methodology will assign each security the middle
rating from the three agencies. This approach implies that two out of the three agencies need to rate the security investment-grade for the security to be eligible for Lehman Brothers Investment-Grade Aggregate indices.
For example, if Moody's, S&P, and Fitch assign ratings of Baa3, BBB, and
BB+ respectively, the new index methodology will remove the high (BBB) and the low (BB+) and assign the Baa3 value to the security in question. In the event that ratings are provided by only two agencies and the third is non-rated, the index will continue to assign the most conservative (lowest) rating of the two agencies. If only one agency assigns a rating, then the index will use it as the assigned rating.
These changes will have a limited impact on the current index universes but could become important if issuers are downgraded or upgraded by a single rating agency in the future. Under the new rules, the U.S. Credit Index will add 59 securities with a market value of approximately $33.4 billion.
The Euro-Aggregate Index will add 6 securities and Euro 3.8 billion in
market value. The Global Aggregate Index will add 58 securities and $36.7 billion in market value. Of note, there will be a change in the index classification for Japanese Government Bonds. The current index classification of A2 will be changed to Aa3.
Lehman Brothers has changed its rating methodology several times over the
past 30 years. From 1973 until August 1988 the index used a 50% Moody's, 50% S&P weighting scheme. This resulted in split-rated bonds (investment grade by one agency and high-yield by the other) contributing only half their weight to the investment-grade index. In August 1988, the scheme used Moody's as the primary rating agency with S&P as a secondary agency.
In October 2003, the index began using the current scheme of the most
conservative of Moody's and S&P.
Lehman Brothers has more than 30 years of experience in structuring bond
indices. The Firm's indices are the most widely accepted benchmarks in the asset management industry, used by over 90 percent of U.S. institutional investors, a majority of large European investors, and a growing share of Asian-Pacific managers. Lehman Brothers has been the top-ranked U.S. bond index provider each year since rankings began in 1997 in Institutional Investor magazine's annual investor poll and was top ranked in Europe by Institutional Investor magazine, Credit Magazine, and Euromoney in 2004.
Lehman Brothers (ticker symbol: LEH), an innovator in global finance,
serves the financial needs of corporations, governments and municipalities, institutional clients, and high-net-worth individuals worldwide. Founded in 1850, Lehman Brothers maintains leadership positions in equity and fixed income sales, trading and research, investment banking, private equity, and private client services. The Firm is headquartered in New York, London, and Tokyo and operates in a network of offices around the world. For further information about Lehman Brothers' services, products, and recruitment opportunities, visit our Web site at www.lehman.com.
For Immediate Release
James Best/Steve Vincent
Aziam Burson Marsteller
Tel: 0 2252 9871 End.