The Rating Process Explained

The Rating Process Explained



As part of our series of ‘Understanding Ratings’ videos, Timothy Poole, Director, Client Business Management, explains the process that a Corporate issuer undertakes to get a rating from Standard & Poor’s.

hello my name is Hugh Baxter and I'm global head of client business management here in Standard & Poor's today I'm joined by Timothy Poole who heads up our corporate business development team here in Europe today's subject matter that we're talking about is the rating process so welcome Tim hello first question – how does a company actually initiate a rating well we rate companies who engage us to do so within the clown business management team we have a line between the commercial side and the analytic side so the CBM team are responsible for engaging with the company while the analytic team are responsible for doing the analytic work ok so if I've decided to get a rating what is the what steps are involved in getting towards that final rating once the engagement letter is signed we turn the responsibility for the rating over to a lead analyst and a backup analyst within one of 10 industry teams across Europe they are responsible for collecting the information analyzing it dealing with the company and answering other questions that arise and also most importantly holding a management meeting whereby they would speak to the senior members of the company in order to ensure they've got all the information of both a qualitative and a quantitative nature and that's because a rating is a function of both a company's business risk profile and their financial risk profile and the analysts will then make a presentation to a committee as it is a collegiate decision a rating opinion and that would lead to the finalization and the publication of that credit rating so once the rating has been assigned what happens next for a company if it has a public credit rating we would publish that rating on one of our electronic media and the company generally would be using that because they are issuing debt in the public markets so that investors can use our rating as one of their decision-making points in deciding whether or not to buy a particular debt issue and that's important because if we are rating a debt issue we need to rate the issuer first so that we would put a rating also onto a particular debt issue and that rating is a function of the particular documentation or structural elements that apply specifically to that issue and that is what the investors would look at when they're making a decision as to whether or not they would wish to buy that also a rating as an ongoing maintained rating or ratings have an outlook and that is our view of where we think the rating would go next in the future so all public ratings are monitored or surveilled as we call it and it's nope intended arrangement a company can keep a rating for as long as they wish to have it okay so if someone would like to find out more information about the process where can they go our website understanding ratings comm contains a lot of written and televisual information but also it provides a number of brochures like this guide to credit rating essentials which gives a good basic understanding of the process and also we have a methodology which runs through in a generic bit way what the analysts look at when they come to a credit rating decision thank you very much Tim

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