Ratings & Reports

credit rating-process-definitions



Credit Rating Process


Ratings and product complexity assessments are assigned according to published methodology.

The rating process in 10 steps:

  1. Engagement
  2. Data gathering and preliminary research
  3. Meeting with management
  4. Analysis
  5. Research report prepared
  6. Formulate rating and suitable recommendation
  7. Rating committee - recommendation and rating report presentation
  8. Communicate rating outcome to the client
  9. Publication of the rating and research report via the website
  10. On-going surveillance of the rating will commence with clients inputting regular predetermined information to the website via a portal which will update the analytical database and update information in the research report and on the website which is freely accessible to retail investors and others.
Key Steps in the Process:

Credit Rating Definitions


An Australia Ratings organisation credit rating is an opinion on the overall financial capacity of an organisation to pay its financial obligations (its creditworthiness). The rating considers the organisation's capacity to meet financial commitments as they fall due. 

An Australia Ratings product credit rating is an opinion about the creditworthiness of a specific debt security. It takes into account the creditworthiness of the organisation and any guarantees or other forms of credit enhancement on the obligation. 

Credit ratings can be either long term or short term. Short-term ratings relate to obligations with an original maturity of 365 days or less—including commercial paper. Long term ratings – relate to financial obligations with a term of more than one year. The long-term rating generally addresses the period out to three to five years.

Note: Plus (+) and minus (-) signs may be added to long term ratings from ‘AA’ to ‘C’ to indicate their relative standing within each category.

Short Term Ratings
assigned to debt securities and financial obligations with a term of up to 12 months

The categories of long and short term ratings in the tables above can in turn be grouped into the following broad classifications of creditworthiness:

Note: Both long term and short term ratings may be placed ‘On Review’ at the discretion of Australia Ratings in the case where the rating is being reviewed for a possible rating change.

This could occur when events or situations which were unanticipated (such as a merger or divestment) occur. The designations of ‘Positive’, ‘Evolving’ and ‘Negative’ will be used to indicate the potential direction in which the rating may transition. The designation of ‘Evolving’ implies the rating may improve, decline or remain the same.

Product Complexity Indicator
A Product Complexity Indicator may be assigned to certain debt securities or fixed income managed funds to augment the credit rating in order to highlight to potential investors the nature of the investment in terms of complexity or non-standard features of the investment product.

 

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