The steps involved in the rating process are listed below in chronological order:
1. Initial contact
In many cases, EthiFinance Ratings is approached by the issuer / borrower in order to request a rating (solicited rating). In the case of unsolicited ratings, the request can be originated by an interested third-party or under the Agency’s own initiative.
2. Contractual mandate
To initiate a rating process, EthiFinance Ratings will sign a services contract with the client. In the case of unsolicited ratings that are undertaken on the sole initiative of the Agency, no contract will exist.
3. “Kick-off” process
The Agency’s business development department will send the client’s contact information to the corresponding Head who will contact the client via e-mail in order to present the team of analysts assigned and communicate the initiation of the rating process. The e-mail will include the names and contact information of: The analysts involved, the Head of the corresponding asset class and the Chief Rating Officer (CRO). A rating book will also be attached which includes all the information that is required in order to perform the analysis. The requested Information will vary depending on the characteristics of the entity being rated and on the sector in which it operates. In the case of unsolicited ratings, there will be no information request and the analysis will be made based on available public information pertaining to the issuer. Information sources that will be used include:
- Financial and qualitative information included in the entity’s latest annual accounts
- Information concerning judicial hearings within the public administration, civil or labour court jurisdictions provided they can be found in the corresponding official bulletins
- Payment behaviour as per the different credit bureaus
- In the case of publicly quoted companies, information disclosed by the corresponding Capital Markets Commission of the country
- Other public information that can be found in the corporate website of the rated entity
This information will also be used for solicited ratings along with any confidential information sent by the client.
4. Credit assessment performed by the team of analysts
The team of analysts will analyse in detail the information received and will value the main aspects that are involved in the credit assessment.
5. Meeting with the company’s management
Once all the available information has been analysed, in the case of solicited ratings, a meeting will be set up with the company’s management in order to resolve any questions that may have arisen during the analysis and to obtain a deeper understanding of the quantitative and qualitative aspects of the client. In order to profit from a more fruitful meeting, the assigned analysts will send the client, with a few days in advance, a list of Q&A. In the case of unsolicited ratings, this meeting will not be part of the process since the involvement of the rated entity is not contemplated.
6. Review of the Report by the Head
Once the analysis has been completed, a rating report will be drafted by the Lead Analyst and will be reviewed by the Head of the corresponding asset class to ensure the proper quality of the report. The Head can make factual or analytical corrections but must not change the proposed rating because his/her participation as an independent “rating approver” in the Rating Committee precludes him/her from determining or influencing the proposed rating outcome. Once the rating report has been reviewed, a Rating Committee will be convened, and the draft report and all supporting documentation shall be sent in advance to the members of the Committee for their review.
7. Rating Committee
The Rating Committee is the body responsible for approving the proposed rating or for modifying it. The Committee is composed of 3 members. During the Committee’s proceedings, the Lead Analyst responsible for the rating proposal will present the analysed entity and will justify the scores given to each of the analytical factors included in the corresponding methodology. After discussing the main aspects of the credit, the Committee will approve a final rating that will be registered in a Minute and be sent to the Committee members for their approval. In certain circumstances, the Committee may delay its approval pending the request of additional information that the team of analysts must procure from the client. Once the additional information has been analysed the Rating Committee will be reconvened for final rating approval.
8. Rating Notification
Once Committee approval has been obtained, the Head of the asset class or the lead analyst will notify the assigned rating to the client or rated entity via a regular e-mail.
9. Client Review or Rated Entity Review, depending on whether it is a Solicited or Unsolicited rating
In certain cases, the client may appeal the rating granted by the Agency. To this end, the client must submit new information and solid arguments that substantiate the appeal and/or have detected significant errors in the analysed data that materially affect the rating. The rating department headed by the CRO may accept or deny the appeal on the basis of the arguments and information disclosed by the client. The Analytical Department will re-submit the credit rating to the Rating Committee for reconsideration if it believes that the appeal is justified. After review of the new information and arguments, the Rating Committee will approve a final rating of the issuer/issuance which cannot be the object of a new appeal on the part of the client. In the case of an unsolicited rating, the rated entity will have 24 hours to review the rating before its publication.
10. Final delivery of rating to the client or to the Rated Entity, depending on whether it is a Solicited or Unsolicited rating
Once the rating is reviewed by the client and if applicable, after finalising the appeal process the Head will again send the final and definitive version of the rating report to the client.
11. Rating Publication
Once the final rating report has been sent, and provided that the rating has been classified as public, it will be published on the Agency’s corporate web. The rating will be published at least 24 hours after the client or rated entity has been notified unless the rated entity explicitly authorises its publication prior to the 24 hour waiting period.
EthiFinance Ratings will continually monitor the assigned rating and will assign a new credit rating at least once a year, though the rating may be reviewed at any time if, in the opinion of the analysis department, events have taken place that have a material effect on the rating of the issuer/issuance.