Standard & Poor's Underlying Rating (SPURs)

What Is Standard & Poor's Underlying Rating (SPURs)?

Standard & Poor's Underlying Ratings (SPURs) provide an opinion on a municipality's credit quality separate from guarantor or insurer credit enhancements. Municipal or other public sector bonds typically include credit enhancement which is used to obtain better terms by providing increased assurance that the borrower will honor its obligation through additional insurance or a third-party guarantee. Standard & Poor issues a SPURS rating only at the request of the issuer/obligor and maintains surveillance of an issue with a published SPUR.

Key Takeaways

  • Standard & Poor's Underlying Ratings (SPURs) provide an opinion on a municipality's credit quality separate from guarantor or insurer credit enhancements.
  • Typically, municipal bonds and other public sector bonds enhance their credit.
  • In order to get a bare-bones look at a city's credit quality, SPURs are used to strip away all these credit enhancement facets.
  • Standard & Poor issues a SPURS rating only at the request of the issuer/obligor and maintains surveillance of an issue with a published SPUR.
  • SPURs involve the same level of analytical review as issue ratings.

Understanding Standard & Poor's Underlying Rating (SPURs)

Standard & Poor's Underlying Ratings (SPURs) involve the same level of analytical review by Standard & Poor's as issue ratings, are identified by the 'SPUR' designation, and use S&P's standard rating scales. By contrast, S&P's issue credit ratings include the creditworthiness of any guarantors, insurers, or other forms of credit enhancement, as well as the currency the obligation is denominated in.

Benefits of SPURs

A municipality may request a SPURs rating in order to demonstrate creditworthiness as an issuer and help attract investors. Nowadays, a lot of investors prefer to have additional information regarding creditworthiness for evaluating different bonds. This gives them the ability to make better-informed choices, while at the same time, giving municipalities and bond issuers access to a wider pool of potential investors.