CREDIT RATINGBank Loan Rating
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What is Credit Rating ?
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Credit Rating is a forward-looking
opinion about credit risk. It express
the credit rating agency’s opinion
about the ability and willingness of an
issuer/ Borrower to meet its financial
obligations in full and on time.
Credit Ratings give investors a rough
idea of the risk associated with
lending money to the entity being
rated. Focus Financial Consultancy
What is Credit Rating ? Cont…….
Credit Ratings - are assigned by rating agencies ( such as ICRA,
CRISIL, CARE & Fitch etc.) to companies and debt instruments -
are designed to gauge the likelihood that a company will
default on its obligations to lenders.
Credit Ratings agencies express the opinions by assigning “Rating
Symbols”. Rating Symbols are different for Short Term Funding
and Long Term Funding.
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Credit Rating Symbols – Long Term Funding
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Benefits of being Rated Entity
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Positive Positive Relationship b/w Rating Grades & Cost of b/w Rating Grades & Cost of Bank BorrowingsBank Borrowings
New Capital Adequacy framework allow commercial banks to
allocate capital in relation to the credit risk embedded in their
exposures.
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Risk Weight age is 150% for the rating below investment grade i.e below BBB and 100% for unrated companies
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Positive Relationship b/w Rating Grades & Cost of Bank Borrowings
Any decrease or increase in such capital allocation could
translate into substantial savings/ additional costs for banks.
Banks are expected to share the savings achieved through
lower capital allocation with investment-grade issuers; at the
same time, given the pressures on profitability, banks may also
be expected to pass on the additional costs for unrated
exposure to their borrowers.
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Credit Rating Process
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Accepted ?
No
Yes
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Rating Methodology
The methodology for creating a rating involves an analysis of all
the factors affecting the creditworthiness of an issuer
company: business, financial and industry characteristics,
operational efficiency, management quality, competitive
position of the issuer and commitment to new projects etc.
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Rating Methodology – Business Risk Analysis
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Rating Methodology – Financial Risk Analysis
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Rating Methodology – Management Evaluation
An evaluation of a company’s management involves:
Understanding organizational and reporting structure Management’s experience and track record Level of commitment Track record in debt payment Adequacy of planning and control system Management ability to manager change in external environment
i.e regulatory or technological changes etc. Risk appetite as shown in financial leverage Succession plan and team work or one man show Corporate Governance Policy and Principal
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Rating Methodology – Project Risk
The relative size of the new project compared with the existing
operations indicates significance of the project risk in overall rating.
Factors considered are:
Implementation risk: Time & cost overruns and technology
obsolescence risk.
Project viability
Funding risk in term of capital structure and funding arrangement
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Focus Financial ConsultancyCredit Rating Advisory Services
Focus Financial Consultancy
Focus Financial Consultancy is
established by a group of
professionals having relevant
experience ,exposure and expertise in
Financial Domain.
Vision
“To be the most admired Consultancy
firm serving clients globally”
Mission
It is our continuous Endeavour to:
“Help our client’s to achieve their
financial goal and Contribute to the
community through entrepreneurship”
Work closely with clients to
understand their Industry, business
process & requirements
Do in-depth research and
analysis of the industry as well
as company related factors.
Combine our knowledge
and expertise to deliver
tailor made solutions
Credit Rating Advisory: We
assist the company to optimize
their credit rating.
We work closely with our client to
understand their industry and
company to present a holistic
and complete picture to rating
agency which helps them in
taking a fare view on the financial
strength and credit worthiness of
our client.
In this line of service, we
Advice and support when
seeking a first time rating
Support for preparation and
review of data/ information and
presentation for rating agency
Develop credit rating defense
or upgrade strategy
Prepare senior management
for rating agency presentation
Achieve timely upgrades /
forestall downgrades
Focus Financial Consultancy
FFC - Credit Rating Advisory Services
Accepted ?
No
Yes
Our Services:Selection of Credit Rating Agency Based on FFC discussion with Management, Analysis of Data and management expectation
It is Important because Knowledge and future prospects of a particular Industry/ Sectors is not same across agencies. Level of open mindedness differ from agency to agency.
Right Credit Rating Agency = Higher Probability of getting Optimal Rating
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FFC - Credit Rating Advisory Services
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Accepted ?
No
Yes
Our Services:Preparation of a Comprehensive report covering following areas:Industry and its attractivenessCompany’s product and its competitive position in marketOperating EfficiencyAccounting QualityEarnings, Financial FlexibilityManagement EvaluationNotes on associated and parent company
Appropriate Packaging of right & timely data along with commentary = optimal credit rating
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FFC - Credit Rating Advisory Services
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Accepted ?
No
Yes
Our Services:Preparation of key departments’ presentations for meeting with the help of concern person.Rehearsal of presentationPrepare notes and replies on expected questions to be ask by analyst
Concern’s person knowledge and appropriate replies will help to Address the doubt of analyst.Create a sense that concern person is aware about market & company and his vision is align to the vision of company.
Focus Financial Consultancy
FFC - Credit Rating Advisory Services
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Accepted ?
No
Yes
Our Services:influencing credit rating agency’s thought process and conclusion about company’s business and future prospects byActive Follow up Meeting Senior Analyst Providing relevant information/ dataRe - Packaging of data by add some extra information to support previous standing
Right perception and conclusion of rating agency = Optimal Credit Rating
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FFC - Credit Rating Advisory Services
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Accepted ?
No
Yes
Our Services:Vetting of Contents to be Publish
It is important to get relevant and right information publish in rating publication so that concern parties can view correct picture of the company in term ofCredit WorthinessMarket PositionFuture prospects
Company use published rating documents for Marketing, negotiation with suppliers, raising funds & for attracting talent pools etc.
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There are more than one reason to
choose us.
Put client’s interest first
Our corporate value – Integrity,
transparency, commitment to
Excellence
Team having Experience, expertise
and exposure of financial domain
Committed to provide quality services
in timely manner
Independent & Responsive
Ability to think out of the box
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