What is a corporate rating?
Corporate ratings are recognized opinions and established instruments of the capital markets and are often essential sources of information for both companies and investors. In addition to traditional bank loans, companies have increasingly expanded their financing sources to capital market instruments such as promissory note loans or bonds or other sources of financing such as leasing. For this purpose, they use their rating as a recognized and transparent financial market information when addressing potential investors. In addition, private and especially institutional investors are looking for investment opportunities and need reliable and efficient credit ratings to support their investment decisions. As an ESMA-registered rating agency, institutional investors may use our corporate issuer and issue ratings for regulatory purposes. Over 100 companies have a corporate rating from Creditreform Rating AG. In total, corporate liabilities amounting to approximately EUR 425 billion are assessed.
The corporate or issuer rating assesses the creditworthiness of a company in a comprehensive rating process. It enables potential investors and business partners to make a reliable assessment of the full and timely repayment of outstanding liabilities by the company.
Rating process of a corporate rating
The rating process includes a comprehensive quantitative and qualitative analysis. The systematic combination of all analyzed quantitative and qualitative factors, results in a detailed assessment of the rated company and its current economic and financial situation. Scenario analyses are used to derive a forward-looking conclusion on the issuer's ability to service its debt.
How are corporate issues rated?
The rating of corporate issues provides an assessment of the credit quality of a particular issue in the non-financial area. This includes, for example, borrower's notes, loans, corporate bonds or other borrowed capital.
The starting point for the rating of a specific financial instrument is the corporate rating of the issuer. In addition, the specific terms and conditions of the issue are taken into account. Numerous quantitative and qualitative criteria are incorporated into the issue rating using a notching approach. The risk areas examined include seniority, collateral, covenants, representations and warranties, issue structure and specific country and sector risks. Therefore, the issue rating may differ from the corporate rating.
While the corporate rating describes the general creditworthiness of the issuer, the benefit of the issue rating is a specific assessment of the probability of default of a specific financial market instrument of the issuer. Investors receive an objective risk assessment tailored to the respective financial instrument for their investment decision.
Rating Methodology Corporate Ratings.pdf303.3 KiB