Credit Rating - Bank Loan Rating

CREDIT RATINGBank Loan Rating

Focus Financial Consultancy

What is Credit Rating ?

Focus Financial ConsultancyFocus Financial Consultancy

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.

Focus Financial ConsultancyFocus Financial Consultancy Focus Financial Consultancy

Credit Rating Symbols – Long Term Funding


Benefits of being Rated Entity


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.


Risk Weight age is 150% for the rating below investment grade i.e below BBB and 100% for unrated companies


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.


Credit Rating Process


Accepted ?

No

Yes


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.


Rating Methodology – Business Risk Analysis


Rating Methodology – Financial Risk Analysis


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


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


Focus Financial ConsultancyCredit Rating Advisory Services


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


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




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




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.




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




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.


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



E-mail ID: [email protected]


mailto:[email protected]

Credit Rating - Bank Loan Rating

Economy & Finance

Transcript of Credit Rating - Bank Loan Rating