RiskMetrics is preparing to launch a "model-based credit analysis tool covering a large universe of products," reports the Financial Times. This product has been developed in conjunction with credit-expert Ed Altman and will give the buy-side another tool as it seeks to develop better methods of evaluating the credit-worthiness of bonds, especially corporate bonds.

"More than 40 years ago, Altman developed the Z-Score, a simple formula using publicly available financial data to calculate the likelihood of a company going bankrupt in a two-year period. He has spent the past year working with RiskMetrics to develop an updated version that investment managers, banks and other interested parties can use to work out the probability of default in the next year and five years." Financial companies are excluded from the model, however.

This expands the ranks of new tools, such as one from Bloomberg, that aims to help users analyze bonds and break their dependence on credit rating agencies. For the moment, the credit rating system has survived in pretty much pre-crash form. But the SEC will likely be directed to undertake a study about how the central conflicts of interest--companies pay for their own ratings--can be broken.

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