Methodology Version History

Changes between each published version of Transparency Analytics rating methodologies. Documents with only a single published version are noted but have no change log.

ABL Rating Framework

v9.9.2025 — Initial version. No subsequent versions.

Corporate Credit Rating Methodology

v10.2025 (October 2025)

Previous version: v02.2025 (February 2025)

Correction: Fixed a grammatical error in the Recovery Waterfall section. The phrase "asset-based facilities are securitizations" was corrected to "asset-based facilities and securitizations."

v02.13.2026 (February 2026)

Previous version: v10.2025 (October 2025)

Expanded instrument rating notching rules (Section VII). The prior version described notching only in general terms. The February 2026 version adds explicit rules for investment grade borrowers (ICR of BBB- or higher):

  • Secured debt is notched up one notch from the unsecured rating
  • Subordinated debt is notched down one to two notches
  • Preferred stock is notched down two notches

For non-investment grade borrowers (BB+ or lower), the existing recovery analysis methodology continues to apply, but this is now stated more clearly in contrast to the investment grade treatment.

Preferred stock treatment in recovery waterfall. The prior version stated simply that preferred stock without a debt claim is not included in the waterfall. The new version adds a specific notching rule for rated preferred stocks of BB+ or lower issuers: they are notched to the lower of two notches below the ICR or one notch below the lowest-rated debt tranche.

New section on preferred stock equity credit. A new subsection (added before the existing Non-Equity Shareholder Financing section, which was renamed from Section D to Section E) clarifies that preferred stock not offering creditor rights in bankruptcy and without terms enabling the holder to trigger bankruptcy generally receives 100% equity credit. An exception applies if the preferred stock has debt-like features or is expected to be redeemed with debt proceeds.

Correction carried forward: The typo from v02.2025 that was introduced in v10.2025 ("are securitizations") is corrected back to "and securitizations."

v03.05.2026 (March 2026)

Previous version: v02.13.2026 (February 2026)

Corrected Regulated Utilities financial metric thresholds. The AAA rating thresholds in the Regulated Utilities Financial Assessment table contained errors in the prior version. The FFO/Total Debt and FFO-Dividends/Total Debt thresholds were listed as upper bounds ("< 40%" and "< 35%") when they should have been lower bounds ("≥ 40%" and "≥ 35%"). These are now corrected. No other substantive changes.

v03.23.2026 (March 2026)

Previous version: v03.05.2026 (March 2026)

New sector-specific section: Nonbank Finance Companies (Appendix D, Section B). This is the primary addition in this version. Nonbank finance companies are defined as businesses with high balance sheet usage where assets are a key source of debt repayment and funding costs are operating in nature. Companies regulated as banks with access to deposit funding are explicitly excluded.

Financial Assessment. A new financial metric table is introduced with the following five metrics and weightings:

  • Revenue Scale (15%)
  • Net Income / Avg. Tangible Assets (15%)
  • Net Charge-Offs / Gross Loans (15%)
  • Adj. FFO / Total Debt (15%)
  • TCE / Tangible Assets (40%)

The high weighting on TCE / Tangible Assets reflects the balance sheet-centric nature of nonbank finance businesses.

Business Assessment. Three additional considerations are highlighted beyond the general corporate framework:

  • Asset Quality: Elevated loss levels can impair capitalization and debt service capacity. Charge-off rates, historical trends, and loan loss reserve adequacy are reviewed.
  • Diversification: Diversification across loan categories with limited credit risk correlation and diversification of revenues beyond interest income (e.g., fee income) are viewed positively.
  • Funding: Reliance on wholesale funding—cyclical and potentially more costly than bank deposit funding—is a key credit consideration. Diversity of funding sources, funding cost trends, and track record of capital market access are evaluated.

Liquidity. Two nonbank-specific liquidity considerations are introduced:

  • Corporate Available Liquidity vs. Debt Maturities: Because nonbank finance companies can operate with negative FCF while investing in assets, corporate debt repayment may rely on refinancing. TA evaluates the coverage ratio of available corporate cash and committed credit lines to corporate debt maturities over 12-18 months.
  • Unencumbered Assets: Productive assets not encumbered by secured debt provide a secondary liquidity source. A greater proportion of unencumbered assets is viewed positively.

New metric definitions added to Appendix A. Two new ratio definitions were added to support the Nonbank Finance Companies section:

  • Adj. Net Income / Tangible Assets: Tangible Assets defined as Total Assets minus Goodwill and Intangibles. Adjusted Net Income may add back stock-based compensation and one-time costs. TA may subtract certain asset categories not expected to generate earnings.
  • Tangible Common Equity (TCE) / Tangible Assets: TCE defined as Shareholders' Equity minus Goodwill and Intangibles, Preferred Stock, and Noncontrolling Interest.

An additional note was also added to the FFO / Total Debt definition clarifying that for nonbank finance companies, FFO is adjusted to subtract net charge-offs.

Section re-lettering in Appendix D. The prior Section B (Regulated Utilities) is now Section C, and the prior Section C (REITs and Commercial Real Estate) is now Section D, to accommodate the new Nonbank Finance Companies section as the new Section B.

v04.23.2026 (April 2026)

Previous version: v03.23.2026 (March 2026)

New Appendix E: Assumptions and Limitations. This is the only substantive addition in this version. A new appendix was added that explicitly catalogs the key assumptions underlying the rating analysis and the inherent limitations of credit rating analysis based on this methodology. The appendix is referenced in the Table of Contents and added at the end of the document (page 17).

A. Assumptions. Lists the principal categories of assumptions involved in applying the methodology, with cross-references to where each is discussed in the main document:

  • Development of a base case forecast for the company (forward-looking performance assumptions)
  • Application of the ratio framework for the Financial Assessment, including sector-specific ratios
  • Weightings of ratios and periods in the Financial Assessment framework
  • Development of the Business Assessment scoring approach (subjective judgment of business characteristics)
  • Assessment of the company's Financial Policy (subjective judgment of relevant factors)
  • Selection of the evaluation approach and key statistical/valuation input assumptions for Instrument Rating derivation

B. Limitations. Identifies inherent limitations of the credit rating analysis, including:

  • Reliance on the correctness of company-provided financial statements and information, which is not independently audited or verified by the rating agency
  • The forward-looking and inherently imprecise nature of the base case forecast, which can change due to factors such as macroeconomic conditions, industry conditions, business strategy, customer base, products/services, competitive landscape, technology, regulations, or financial market conditions
  • Judgment-driven application of weightings across ratios and time periods, which may yield different rating outcomes
  • Applicability of the ratio framework to a particular industry or company, which may in certain cases require augmentation
  • Limited, incomplete, or unavailable information regarding the company's industry, business, products, customers, and competitors used in the Business Assessment
  • Reliance on management-provided information for the Financial Policy assessment, which may be incomplete or change over time

Table of Contents update. The Table of Contents was updated to include the new Appendix E entry (page 17). No other substantive changes were made to the body of the methodology.

Credit Tenant Lease Rating Methodology

v9.9.2025 — Initial version. No subsequent versions.

Project Finance Credit Rating Methodology

v2.19.2026 (February 2026)

Previous version: v9.9.2025 (September 2025)

This was a major update adding sector-specific guidance (Appendix B) and refining several financial assessment concepts.

New Appendix B: Sector-Specific Factors. The September 2025 version covered only the general project finance framework. February 2026 adds detailed sector-specific guidance for two project types:

Renewable Power Generation (Solar and Wind):

  • Added financial metric tables with DSCR thresholds for contracted and noncontracted solar and wind projects
  • Sector-specific financial assessment factors: resource variability (P90 methodology), curtailment risk, panel/turbine degradation, and availability rates
  • Solar projects are characterized as having strong business profiles; wind as in-line, reflecting higher resource variability
  • Construction risk: solar is particularly low risk due to modular, offsite-manufactured design; wind is modestly higher
  • Offtaker cap exception: renewable projects may qualify for a limited exception to the offtaker rating cap given economic and regulatory incentives for utilities to honor PPAs

Natural Gas-Fired Power Generation:

  • Added financial metric tables for contracted and merchant projects, including DSCR and FCF/Total Debt thresholds
  • Sector-specific financial assessment factors: earnings stability under contracted vs. merchant structures, spark spread and profitability analysis, and amortization/debt repayment requirements
  • Added a supplemental Table 14 with debt repayment prior to maturity guidelines for contracted vs. merchant projects at each rating category
  • Asset life assumptions for refinancing risk analysis are noted as highly circumstance-specific, with the possibility of shortened assumptions for low-efficiency plants in markets transitioning away from fossil fuels

New Financial Assessment concept: Amortization/Repayment Structure. Added a new paragraph clarifying that Low Risk projects are generally expected to fully amortize, and that higher DSCR thresholds for Medium and High Risk projects reflect lower required amortization. For non-amortizing structures, the presence and projected magnitude of excess cash flow sweeps is an important rating consideration.

Refined stress scenario description. The prior version's description of stress/breakeven scenarios was simplified: the new version removes the explicit statement that investment grade projects must be stress-tested against a "downside stress test scenario" and instead focuses on key stress variables and the 1.0x DSCR floor for investment grade projects.

Improved Cost Recovery/Availability-Based Projects language. Clarified that very high predictability of cash flows and DSCR stability (not just cash flow) is what distinguishes these projects, and that project credit quality "can be similar to the offtaker's depending on circumstances."

Minor correction: "refinance risk" changed to "refinancing risk."

v03.06.2026 (March 2026)

Previous version: v2.19.2026 (February 2026)

New sector coverage: Data Centers (Appendix B). The major addition in this version is a new Data Centers section in Appendix B, adding detailed rating guidance for data center project finance transactions. The cover page scope description was also updated to replace "industrial processing plants" with "digital infrastructure."

Key topics covered in the new Data Centers section:

Financial Assessment:

  • Lease Contract Profile: NNN leases (typically 10-20 years) with investment grade tenants are the strongest structure; gross leases are weaker but still strong relative to other project finance categories; colocation projects with shorter-term (1-3 year) gross lease portfolios are viewed as relatively low risk due to contracted revenues and lease stickiness
  • Recontracting Risk: Identified as a key credit consideration given rapid technology evolution, particularly for large single-tenant AI training facilities. A rent discount is typically assumed at recontracting, with the magnitude dependent on technical and demand characteristics. For colocation portfolios with established renewal patterns, recontracting risk is less significant
  • Power Costs and BYOG: Power costs are typically passed through to tenants. Projects that include on-site power generation ("bring your own generation" / BYOG) benefit from secured power availability but take on power generation credit considerations. BYOG offtake is stronger if the tenant (rather than the project entity) is the power offtaker
  • Capital Investment Requirements: Amount of capital needed to maintain long-run competitiveness is a key financial assessment factor, particularly in the context of recontracting risk or increasing competition (e.g. liquid cooling upgrades, power density increases)

Business Assessment:

  • Cash Flow Stability: High short-run stability from contracted revenues, but long-run stability depends on demand strength and technology positioning. Key factors include supply-demand balance for the target workflow category (AI training, AI inference, cloud/enterprise) and tenant diversification
  • Competitive Profile: Data centers benefit from high tenant switching costs and integration. Long-term positioning is supported by alignment of technical characteristics (power density, cooling, latency) with market requirements and design flexibility
  • Operating Performance: Generally low operational complexity since projects typically do not own or manage IT equipment. Liquid cooling systems are the most complex element. NNN lease structures may transfer operational responsibility to the tenant

Construction Phase: Generally simpler than most project types; increasingly standardized and modular designs reduce risk. BYOG increases construction complexity. Common constraints are power availability, grid interconnection, and permitting

Rating Modifiers: Refinancing risk is often intertwined with recontracting risk. Asset life assumptions are situation-specific and can be reduced significantly for facilities not viewed as strongly positioned technically or competitively

v03.26.2026 (March 2026)

Previous version: v03.06.2026 (March 2026)

Refinements to Data Centers section (Appendix B). This version makes targeted clarifications to the Data Centers sector-specific guidance introduced in v03.06.2026. No new sectors or sections were added.

  • Lease Contract Profile: Added that NNN lease structures with residual value guarantee mitigation (in addition to those with no recontracting risk) can create a very strong credit profile with ratings based largely on the investment grade tenant
  • Construction Phase Assessment: Clarified that large-scale projects carry higher construction complexity and added that construction risk can be magnified if tenant leases contain provisions such as lease termination rights triggered by construction delays
  • Rating Modifiers: Minor wording simplification

Real Estate SASB Rating Methodology

v9.9.2025 — Initial version. No subsequent versions.