Issuer's Guide to Moody's
Rating Process
This section provides
important information about the Moody's rating process for issuers or
prospective issuers of debt. Our Business Development Team is available by phone,
e-mail, or for one-on-one meetings to answer all of your questions about the
rating process, including: How long does it take? What information do I need to
provide? What sort of rating should I get? Is confidentiality assured?
If you have questions about
our procedures or would like to engage us for a rating, please contact the
relevant member of our Business Development Team below, or scroll down to learn
more about the Moody's rating process.
Key Contacts in Central Europe:
Czech Republic
PRAGUE
Moody’s Central Europe a.s.
Washingtonova 17
110 00 Prague 1
Czech Republic
+420 224 222
929
+420 221 666 378
Petr Vins
Branch Manager
Moody’s Central Europe
Countries Covered: Albania, Bulgaria, Czech Republic, Romania, Slovenia and
Slovak Republic
+420 221 666
312
petr.vins@moodys.com
Anna Jelowicka
Assistant Vice President
Business Development Group
Countries Covered: Bosnia & Herzegovina, Estonia, Croatia, Hungary, Latvia,
Lithuania, and Poland
T:
+48 22 772 45 23
M: +48 509 112 199
anna.jelowicka@moodys.com
Brunhilda Bibic
Marketing Associate, CEE
Business Development Group
Countries Covered: Serbia, Montenegro, and Macedonia
+420 221 666 362
brunhilda.bibic@moodys.com
Andreas Naumann
Senior Vice President
Head of Business Development EMEA
+49 69
70730-703
andreas.naumann@moodys.com
_________________________________________________________________
Please click on the headings below to learn more
First-Time Rating Process
Obtaining a Moody's rating
is an active, ongoing dialogue between the issuer and our analysts. As an
issuer, you naturally play a critical role in the rating process, which is
transparent and entails an open dialogue about our views, processes and
conclusions. Once issued, our ratings are continuously examined and updated
through dialogues and regular meetings in which you are encouraged to raise any
concerns and present all materials that you believe are pertinent to our
analysis.
If you are new to Moody’s,
the rating process begins with an introductory meeting. An associate from our
Business Development team will introduce Moody’s procedures and discuss the
specific sorts of data that will be most useful in developing an understanding
of your organisation. Our goal at this point is to ensure that you understand
our approach to credit analysis and the types of information that will be most
important to us.
Moody’s concentrates on
several essential elements relevant to your long-term and short-term risk
profile. Typically, we find that this information is already available
internally and is not dissimilar to the sort of information that you might
present to senior management.
Meeting with management
The initial analytical
meeting often takes place at your head office and typically lasts a full
morning or day including site visits. Moody’s will discuss any issues that you
deem relevant. For example, for an industrial company we would tend to focus on
the following subjects:
- Background and history of the group and the
specific entity that will issue the debt.
- Corporate strategy and philosophy – usually
presented by the CEO, CFO or combination thereof.
- A full analysis of business risk including
industry analysis, competitive position, cyclicality and seasonality,
vulnerability to technical changes, and regulatory environment.
- A detailed analysis of the company's
financial risk including (1) cash flow stability and predictability and
the ability to service debt obligations, (2) operating margin development
and outlook, (3) the cost structure and the ability to drive efficiencies,
and (4) a balance sheet analysis in terms of debt profile-maturity and
quantum. This analysis is forward-looking and would include a review of
three-year financial projections.
- An analysis of the management team both in
terms of their strategic vision for the company going forward and track
record and ability to successfully execute that strategy.
Committee's rating decision
Following the meeting the
analytical team undertakes further due diligence – generally in consultation
with the company’s finance team – and ultimately makes a recommendation to a
credit committee specifically constituted for your company. This tends to
consist of the relevant industry specialists, regional Managing Director and
other relevant credit specialists within Moody’s.
Rating process timeline
Typically the entire rating
process, from your preliminary discussion with us to the public release of the
rating, takes about 90 days. We are sensitive to the many concerns you may have
about timing and can adjust the process to accommodate tighter financing
schedules and other needs.
Rating dissemination
Once our rating committee
has made its decision, you will be informed of the rating and our rationale. If
you decide to proceed, the new rating is distributed by press release
simultaneously to the major financial media worldwide. It is our practice to
release rating opinions before each issue sells so that investors may use them
in their purchase decisions. A detailed description of your organisation, the
rating rationale and the specific rated issue will also appear on our web site
and in various Moody’s publications.
Please note that we provide
unrated European rating applicants with the ability to determine whether or not
their ratings will be made public. We recognize that issuers' trust in the
confidential nature of our relationship is an essential component of the rating
process. We fully appreciate and understand the necessity of keeping the
information in our possession confidential at all times and we make every
effort to do so.
Our Rating
Methodology
Moody's analyses all relevant
risk factors and viewpoints in arriving at a rating opinion. Several analytical
principles guide that process.
- Focus on the long term – Our analytical focus
is on fundamental factors that will drive an issuer's long-term ability to
meet debt payments, such as major economic downturns, a radical change in
management strategy, or major regulatory developments. Our ratings are not
intended to ratchet up and down with business or supply-demand cycles or
to reflect short-term market movements.
- Emphasis on stability and predictability of
cash flow –
One of our main concentrations is on getting behind the drivers of cash
flow generation and, in particular, the predictability and sustainability
of cash flow. We will examine financial projections in detail and endeavor
to understand with you the key assumptions behind the projections. If
appropriate, we will undertake sensitivity analyses on management base
cases and build into the model a modest economic downturn to help
determine cash flow resilience.
Specific risk factors
likely to be weighed in a given rating will vary considerably by sector.
Detailed methodology reports for all major sectors we follow can be obtained
through our Issuer Marketing Team and on the Rating Methodology section of the site.
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What to Expect from the
Moody’s Rating Relationship
We understand that issuers
want timely and clear responses to their questions and concerns. We know these
are essential elements of a positive professional relationship. To that end, we
have developed some best practices for our analytical teams.
- The Moody’s analytical team will contact
you ahead of meetings to let you know our agenda and to seek your agenda
issues, tell you who will be attending from Moody’s, and confirm the time
and place for the meeting.
- We will come prepared, having read recent
materials about your organisation, such as the presentation book for the
meeting and the quarterly statement.
- We will strive to ensure that you know
where we stand on key credit issues for your organisation (both the
plusses and the minuses), our credit rating outlook and the most important
factors that could lead us to a rating.
- We will strive to ensure that you are
familiar with our analytical methodologies and absorb your insights.
- We will listen carefully to your views on
your firm and your industry.
- We will keep open minds.
- We will answer your questions as fully and
promptly as we can.
- We will understand your securities issuance
and other deadlines, and strive to meet them.
- We will follow up after meetings to ensure
matters remain on track, and that your questions for us have been
answered.
We expect you to let us
know how we are measuring up on these commitments. Subsequent to most meetings,
you should receive a feedback form that will give you a chance to let us know
your opinion. We ask you to take the time to complete it so we can serve you
better. Our door is always open.
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The Value of
Ratings to the Rated
There are several ways in
which investors use ratings that in turn provide value to issuers. For many
investors, ratings are a critical element in pricing securities and are often
used as a benchmark for setting investment guidelines. By providing dependable,
globally comparable opinions on credit risk, Moody’s ratings thus help to open
investment horizons to a wider variety of market segments.
Wider access to
capital
Since our credit opinions
are widely disseminated, broadly used and clearly understood by institutional
investors, they can open an issuer’s debt to a wider range of potential buyers.
In today’s global markets, a rating is in effect a “credit passport” that can
provide access to international pools of debt capital in, for instance, markets
where an issuer is not well known or where investors may not be familiar with
the issuer’s language, its business culture, or its accounting conventions.
Financing flexibility
This wider market access
typically translates into reduced funding costs, particularly for higher-rated
issuers. The credibility of our ratings may also allow rated issuers to enter
the capital markets more frequently and more economically and to sell larger
offerings at longer maturities.
Market stability
Ratings and the reports on
the research behind our opinions can also help to maintain investor confidence,
especially during periods of market stress. For example, a news item could
adversely affect the prices of a company’s outstanding bonds, even if the news
has no real impact on the bonds' long-term creditworthiness. The reassurance of
a Moody’s rating and accompanying analysis of the situation can help to
alleviate investor concerns.
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