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An assessment of the credit worthiness of
individuals and corporations. It is based upon
the history of borrowing and repayment, aswell as the availability of assets and extent of
liabilities.
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Grade summarizing the willingness & ability
to pay
Ability to pay Quantitative
Willingness to pay Qualitative
Credit Rating is NOT A judgment or Statement regarding any
aspect of public policy
A political statement in favor or against a
particular person or administration
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Increase Investors acceptance
Current Economic environment
Current Capital Market environment
Bottom Line : Lower Interest Cost when theco. gets good credit rating
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Commercial Banks
Mutual Funds
Investment Banks
Leasing Companies
Insurance Companies
Bonds & Securitization
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Sovereign Ratings: Assess the country credit risk
and is used as a point of reference for country
borrowings from WB, IMF, ADB etc.
Entity Ratings: Risk ratings of Corporate Entities
Instrument Ratings: Ratings of Bonds issued by
different corporations and MNCs
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Company: A.M. Best: Moody's: S&P: Fitch:
AIG A A1 A+ AA-
Allianz A - AA -
American General A A1 A+ A-American National A - AA- AA-
Aviva A - AA- -
Axa Equitable A+ Aa3 AA AA-
EquiTrust B+ - - -
Fidelity A- - A+ BBB-
Genworth Financial A Baa3 BBB A-
Hartford A A3 A A-
ING A A2 A+ A
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1. Decision & Doc ments
2. Rating Presentations: meetings,
conference calls &/or site visits
3. Rating committee, comm nication,press release, reports
4. Appeal Process, if necessary
5. S rveillance
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Credit Ratings
Methodology
Business
Risk Profile
Analysis
Financial
Risk Profile
Analysis
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Business
Risk
Country
Risk
Company
Position
Industry
FactorsProfitability/ Peer GroupComparisons
Political Economic
Industry Specific factors Foreign exchange
Industry Trends Industry Structure
Market Size
Growth Potential
Cyclicality Bases of Competition
Changing Technology Operating Risk
Regulatory Environment
Competitive Factors Market position
Keys to Success Size
Diversification Management
Validation of Company
Position Trends Peer Group Comparisons
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Financial
Risk
Accounting
Cash Flow
Adequacy
GovernanceRisk
Liquidity /Short-term
Factors
Accounting Regime
Reporting & Disclosure Analytical adjustments
Ownership
Board of directors Management practices Financial Strategy
Risk Tolerance
Accounting Practices
Internal controls
Focus on debtservice capability
Analytical distinctions withprofitability
Cash flow measures / ratios
Operating sources & usesOf liquidity
Other potential calls on
Liquidity Debt Characteristics
Bank credit facilities
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Risk Profile Minimal Moderate Intermediate Aggressive ighlyLeveraged
Excellent AAA AA A BBB BB
Strong AA A A- BBB- BB-
Satisfactory A BBB+ BBB BB+ B+
Weak BBB BBB- BB+ BB- B
Vulnerable BB B+ B+ B B-
#The matrix does not apply to the lowest rungs of credit spectrum i.e. CCC category andbelow
Note: The above grid is only an indicative framework to guide an Analyst in determining the
rating.
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