Rating assignment procedure
Credit capacity rating is assigned to companies from all sectors of economy on the basis of the data presented by the company itself, as well as the data from open sources which our Expert RA agency considers reliable. In case of a holding or several closely affiliated companies, credit rating may be assigned only to a holding.
A corporate bond rating, on the other hand, may be assigned to a specific emission of bonds, and ability to pay for bonds and perform other emission obligations is assessed on the basis of financial and other information related to a bond-issuer (or a trustee). Financial stability of the holding, inside which our issuer functions, is taken into consideration by Expert RA analysts in the process of assigning reliability rating to a bond loan. A necessary and sufficient condition to apply to the agency in this case is to have a prospect of the bond issue.
In any case both the credit and reliability ratings may be assigned only on the basis of sufficient amount of information. Main stages of assignment procedure are similar for the both types of rating:
1. A company applies to the agency
At this stage a company applies to the agency for preliminary assessment of possible rating assigned by the agency.
2. Preliminary assessment of possible rating assignment
Upon receiving an application our experts gather available information on the company or the corporation bond issue, and then the agency decides whether the rating may be assigned.
3. Agreeing on terms of assigning rating
At this stage the agency together with the company representatives determine main conditions for assignment of the rating, necessary amount of information, time period for the assignment. The agency appoints a group of analysts to develop the rating as well as the main agency contact person. The group necessarily includes a specialist knowledgeable in the area of the company’s activities. The company and the agency sign an agreement to fix all rights and obligations of the sides in relation to each other and to third parties, and all the achieved agreements are recorded.
4. Information analysis
The company presents to the agency required information about its financial activity, strategic development, main industrial indicators etc. On the basis of the information, backed by information from other sources, the agency analyses credit capacity of the company and singles out major activity risks - and their influence on credit capacity of the company or its ability to fulfill its obligations related to a specific bond loan timely and in full volume. Credit capacity assessment takes places in direct contact with the company representatives; they may provide the agency with additional information, if required, or decode certain group of indicators. At this stage the rating agency holds a meeting with the company top management to discuss rating-influencing key factors.
The agency guarantees confidentiality of information presented by the company.
5. Preparation of rating report
Following the analysis of the information on the company’s activity and economic situation at the main markets, including information presented in the process of rating-assignment, and meetings with the company’s top management, the analytic group prepares a rating report, containing data on main risks for the company. The rating report is presented to the rating committee, comprising the agency’s leading specialists.
6. Rating assignment
After discussing all factors, influencing the company credit capacity (or reliability of its bond loan) the rating committee, comprising the agency’s leading specialists, decides on the level of the assigned rating. The information on the decision and the reasoning behind it (rating report) is then passed to the company.
7. Rating disclosure
If the company decides to disclose the rating and presents to the agency its written permission to disclose the information about the fact of the rating-assignment, the Expert RA rating agency informs investors, the company partners and other interested parties through information agencies and other mass media structures about the fact of the rating-assignment. Otherwise the company is not allowed to use the rating-assignment information, or the rating itself in dealing with third parties in any capacity, but, in the first place, in the capacity of an official assessment of credit risks’ level, credit capacity or ability to fulfill its obligations. In this case
The agency is obliged to secure the rating assessment confidentiality, together with the information related to the rating-assignment process.
8. Rating monitoring
When the rating is assigned, the Expert RA analysts conduct regular monitoring of the company status regardless of whether the company agreed or disagreed to disclose the rating. In case of any events that may strongly affect the company credit capacity, the agency conducts additional analysis and, based on its results, may have the rating changed or reconfirmed. If no events affecting the company credit capacity have taken place, the agency once a year revises the assigned rating. While being monitored, the company is liable to timely inform the agency analysts of all important corporate events, and regularly present financial reporting (including quarterly one) and other corporate documents. The agency analysts may use other available sources of information.
- Rating assignment procedure
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