Credit Rating Process :
Credit Rating Process
Slide 3:
Credit Ratings
Methodology Business
Risk Profile
Analysis Financial
Risk Profile
Analysis
Slide 5:
Business
Risk Country
Risk Company
Position Industry
Factors Profitability
/ Peer Group
Comparisons 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
Quality of Earnings
& Analytical adjustments
Peer Group Comparisons
Slide 6:
Financial
Risk Accounting Cash Flow
Adequacy Governance
Risk 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 debt
service capability
Analytical distinctions with
profitability
Cash flow measures /
ratios Operating sources & uses
Of liquidity
Other potential calls on
Liquidity
Debt Characteristics
Bank credit facilities
Business Risk/Financial Risk Matrix :
Business Risk/Financial Risk Matrix # The matrix does not apply to the lowest rungs of credit spectrum i.e. ‘CCC’ category and below
Note: The above grid is only an indicative framework to guide an Analyst in determining the rating.