An emerging market credit scoring system for corporate bonds

In this article we introduce a scoring system (EMS Model) for Emerging Corporate Bonds. The scoring system provides an empirically based tool for the investor to use in making relative value determinations. The EMS Model is an enhanced version of the statistically proven Z-Score model. Unlike the original Z-Score model, our approach can be applied to nonmanufacturing companies, and manufacturers, and is relevant for privately held and publicly owned firms.The adjusted EMS Model incorporates the particular credit characteristics of emerging markets companies, and is best suited for assessing relative value among emerging markets credits. The model combines fundamental credit analysis and rigorous benchmarks together with analyst-enhanced assessments to reach a modified rating, which can then be compared to agency ratings (if any) and market levels. We have included a summary of Mexican companies for which we have applied the EMS Model. We have included in this a description of Mexican company credits, first from prior to the Mexican crisis (1994) then followed, in some cases, to a more recent date.