The rating process usually begins when an issuer, sponsor/arranger or underwriter (or, in any of these cases, its agent) contacts a member of Fitch’s Business and Relationship Management (BRM) group with a request to engage Fitch to provide a credit rating.
Alternatively, Fitch may initiate rating coverage on an unsolicited basis, where sufficient public information is available, to broaden industry coverage or provide insight to market participants.
Analysts base their rating analysis on a thorough review of information known to them and believed to be relevant to the analysis and the rating decision in accordance with the applicable criteria. The rating process incorporates information provided directly to Fitch by the issuer, arranger/sponsor or other third party.
In most cases for solicited credit ratings, the issuer’s management or transaction sponsor participates in the ratings process via in-person management and treasury meetings, on-site visits, teleconferences and other correspondence. Analysts also consider macroeconomic data, market events and any other information deemed relevant for rating analysis, such as data from an issuer’s peers, data provided by other analytical groups within Fitch or publicly available information.
Requested non-public information can include:
The analytical team conducting the analysis will determine if sufficient information is available to form a view on the creditworthiness of the issuer. The rating committee will also consider whether there is sufficient information to assign a credit rating. If Fitch believes that the information available, both public and private, is insufficient to form a rating opinion, no credit rating will be assigned or maintained.
The analytical team conducting the analysis will prepare a detailed questionnaire for the issuer’s management team, which typically involves:
Fitch conducts a detailed discussion with arranger, management team or sponsor to understand the business and convey Fitch’s initial thoughts. This can be done through:
Credit ratings are assigned and reviewed through a committee process. The analysis required beforehand includes a complete application of sector-specific rating criteria and methodologies, including but not limited to:
Where a debt issue or financial structure is deemed to have unique or complex features or does not appear to have a fundamental economic purpose, a screening committee (SC) may be held to determine whether the full rating process should proceed. A SC is not a rating committee but is rather a cross-sector committee that provides an initial layer of review to consider such rating proposals early in the rating process. The primary purpose of the SC is to determine the feasibility of assigning a credit rating to such proposals, which may need a crosssector review to assess how certain credit risks should be considered and which rating criteria may be applied.
Once information has been collected and the issuer and/or securities analyzed in accordance with Fitch’s criteria and methodologies, the primary and secondary analyst will form a rating recommendation and document their analysis and rationale in a committee package.
The committee package must contain sufficient content, consistent with the methodology and criteria that apply to the analysis, to provide a solid basis for the recommended credit rating. The package must include a summary of key rating drivers, sensitivity analysis, criteria variations (if any), and details of reasonable investigation, amongst certain other minimum content.
Committees consider the information and rating recommendation presented in the committee package, and discuss the recommendation. Voting members are chosen based on relevant experience, with seniority and experience thresholds reflected in Fitch’s committee quorum requirements. The committee considers relevant quantitative and qualitative factors, as defined in Fitch’s established criteria and methodologies, to arrive at the credit rating that most appropriately reflects both current and prospective performance
Once the committee concludes, the outcome is communicated in writing to the issuer or, where applicable, its arranger/sponsor/ agent (exceptions apply).
In communicating the credit rating to the issuer (or arranger/sponsor/agent), the rating action and the principal grounds on which the credit rating is based must be explained. Typically, analysts use a draft rating action commentary or a draft presale report, which includes the committee’s ratings decisions, to convey this information. The primary analyst provides the issuer (or arranger/sponsor/agent) with the opportunity to review Fitch’s draft rating action commentary (or presale report) to allow the issuer (or arranger/sponsor/agent) to check for factual accuracy and the presence of non-public information. Fitch evaluates this feedback from issuers while retaining full editorial control over its commentaries.
The rating action is published after meeting the country’s issuer communication requirements.
Fitch’s ratings are typically monitored on an ongoing basis and the review process is a continuous one. Monitored credit ratings are also subject to a review by a rating committee, at least once annually. Certain sovereign and international public finance credit ratings are reviewed at least every six months, according to a calendar of scheduled review dates.
Analysts will convene a committee to review the credit rating instead of waiting for the next scheduled review if a business, financial, economic, operational or other development can reasonably be expected to result in a rating action.
If you’d like to learn more about our process, please contact us at your convenience.