1 / 19

Industry Research

Learn about credit rating agencies and how they assess creditworthiness, measure repayment probability, and enhance transparency in the financial market. Explore the factors driving bond ratings, the role of agencies like Moody's, and how these entities generate revenue.

landgrafm
Download Presentation

Industry Research

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Industry Research Credit Rating Agency Group 1 Chris Mei Yu Steven John

  2. What is rating agency? • Independence assessment of a creditworthiness of a bond • The credit rating measures probability of timely repayment payment and interest of a bond • AAA --- The highest investment grade • BBB --- The lowest investment grade • Below BBB--- Junk bond • E.g. Moody, Standard & Poor and Fitch rating

  3. Why credit rating agency exist? • Reduce asymmetry between lenders and borrowers • Enhance transparency and efficiency in the fixed-income securities market

  4. How are bond rated? • Application form to rating agency by issuer or its agency either via telephone call or in writing • Rating issuer's debt instruments for decades • Doing several weeks before the issuance of the bonds • Providing the documentations • Present the credit worthiness agency at rating agency's or issuer's office • The rating is released to the issuer, a wire service and a publication of full credit report

  5. Elements determining the rating • Economic Factors • Debt/Issue Structure • Financial Factors • Management/ Structure Factors • Investment Policy and Practice • Willingness to pay

  6. Credit Rating Information

  7. How credit rating agency makes money • Rating fees from corporations it rated • Consultant fees for credit risk management service

  8. NYSE: MCO Revenue in 2002: $1.0billion No. of employees ≈ 2100 Moody’s Corporation

  9. Moody’s credit rating area • Corporate Finance • Banking • Sovereign (Nations) • Structured Finance • US Public Finance • Funds

  10. Corporate Finance • Investment Grading • Leveraged Finance • Syndicated Loan • Project Finance

  11. Banking • Long-term deposit rating • Short-term deposit rating • Financial strength rating

  12. Sovereign • Rating for foreign-currency bond • Rating for foreign-currency deposit

  13. Structured Finance

  14. US Public Finance • Rating on municipal bond

  15. Managed Fund

  16. Income sources

  17. End

More Related