A credit rating is a comprehensive tool for assessment of an obligor’s creditworthiness, of reliability of its debt obligations and for establishing fee for relevant credit risk.
It allows the rating’s bearer to show potential investors and partners its creditworthiness without divulging any confidential information, and to make relations between obligor and investor highly transparent and efficient.
High credit rating enables the obligor to get resources at lower rates, albeit a credit rating itself, whatever level it is, is a benefit for the obligor, since it exhibits information transparency of the entity rated.
Employment of a credit rating by its bearer
Obtaining a credit rating is necessary for a company which strives to confirm its transparency, reliability and financial strength.
This need may occur in the following cases:
- issuing corporate bonds – the issue rating empowers the investors to see the quality of these bonds, which contributes to successful placement of the issue;
- attraction of investments – the rating history in the company creates a favorable financial reputation, which is of great importance for the investor (especially for a foreign one) in implementing long-term projects;
- intention to sign a contract with suppliers (especially with foreign ones) – when a company has a rating, the partners may offer more profitable contractual terms, for instance to waive a letter of credit and to provide defer of payments.
A credit rating empowers its bearer to:
- strengthen relations with all types of counterparties;
- be distinguished among other Ukrainian issuers and to attract investors;
- show efficient financial performance without divulging any confidential information;
- place bonds or other debt instruments on the best terms;
- create a positive track record and financial reputation;
- diversify lending vehicles and to reduce their servicing cost;
- obtain an unbiased evaluation of company’s performance;
- determine key strategic factors, which affects obligor’s creditworthiness.
Employment of credit ratings by participants of the financial market
Today credit ratings are the most reliable source of information on creditworthiness of a potential business partner. A rating report contains impartial information, which is necessary for analysis of investment risks.
The scope of employment of ratings is very wide. They may be used by different participants of the financial market, for instance by:
- investors (both companies and individuals) when analyzing risks associated with investing in a company or its securities (including investing in construction projects), and when deciding on depositing funds;
- insurance companies, non-state pension funds, asset management companies – when placing their reserves;
- banks – when deciding on granting a loan to a company or purchasing its securities;
- leasing companies – when analyzing a would-be leasing recipient;
- companies – when deciding on cooperation with its counterparties and on terms for granting a goods credit.
List of Ratings
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