Magazine article Global Finance

Credit Where Credit's Due

Magazine article Global Finance

Credit Where Credit's Due

Article excerpt

The booming credit universe is providing rich pickings for providers of independent research.

If the change in fortunes for financial services companies has been a dip on a rollercoaster, then credit analysts have been sat in the last couple of carriages. With corporate bonds providing plumper revenues for many banks than other departments, credit research teams have been relatively safe from the threat of redundancy-until recently. Increasingly, though, banks are questioning whether they can afford to keep these expensive teams. That question has been given added urgency by other shifts in the credit industry.

Worried over conflicts of interest, bond buyers are increasingly turning to independent credit analysis rather than relying on recommendations from the sell side of banks. "We started this company knowing that institutional customers knew that the information provided to the them by the sell side was tainted," says Paul Ciasullo, an analyst at independent credit research team Creditsights in New York. "It may be new to mom and pop unfortunately, but it's not new to the institutions to which we're selling our research."

Creditsights was founded in late 2000 by a handful of bond traders and analysts. It's since grown from a team of six to now over 25 analysts. Annual subscriptions to the company's research cost $12,000 per individual user. "We have companies managing less than $10 million in assets with a couple of people taking a subscription," says Ciasullo, "and we have companies with literally hundreds of billions of dollars buying the research for their entire research department."

The blurring of the boundaries between equity and credit markets is sparking growing interest in these services outside the traditional bond buying universe. Equity investors are increasingly looking to firms such as New York-based Gimme Credit to provide capital structure analysis. …

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