Available dates

Mar 2—3, 2020
2 days
New York, New York, United States
USD 2995
USD 1497 per day

Disclaimer

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Full disclaimer.

About the course

At the end of this two-day course, participants will have obtained a sound understanding of the key drivers behind a corporate issuer and instrument rating. During the course, participants will have the opportunity to apply the tools and metrics applied by a rating agency, including key criteria such as parent-subsidiary linkage, country ceilings, treatment of pension liabilities and hybrid capital. The program includes the application of methodologies to real companies using Fitch’s Ratings Navigator.

Key Learning Outcomes:

  • Interpret the meaning of corporate issuer and issue ratings, outlooks and rating watches
  • Apply the corporate ratings methodology and criteria
  • Understand the impact of specific criteria topics on a corporate rating (e.g. parent-subsidiary linkage, industry caps, country ceilings)
  • Execute a ‘desk based’ assessment of an issuer and debt issue

General Principles

(Review of pre course background reading)

Credit rating scales

  • International issuer ratings – foreign or local currency; long term and short term
  • Recovery ratings
  • Other international credit ratings
  • National credit ratings
  • Country ceilings
  • Additional usage: expected, private, program, interest only, principal only, rate of return ratings

Non credit rating scales

  • Servicer ratings
  • Funds ratings
  • Asset manager ratings

Other forms of opinion

  • Rating assessment service
  • Credit opinions
  • Opinions provided by Fitch non rating affiliates

Rating watches and rating outlooks

Rating actions

Application: Quiz / exercise - rating terminology

Rating Process

Initial ratings:

  • Process of engagement and timeframe to obtain a corporate credit rating
  • Credit information required, management meetings and site visits
  • oCredit committee process and issuer notification
  • Rating publication and ongoing surveillance

Monitoring and updating of existing ratings:

  • Information required, review meetings, regulatory requirements
  • Drivers of rating actions
  • Meaning of Stable, Negative and Positive outlooks
  • Rating watches

Other rating processes

  • Rating appeal procedure. Requirements for probability of success
  • Rating withdrawal: typical circumstances, process

Compliance and Regulation

  • Avoidance of conflict of interest between agency, analyst and issuer
  • Rating action publication regulations

Rating Statistics

  • Default rates
  • Transition matrices
  • Recovery rates
  • Ratings distribution

Rating Methodologies and Criteria

  • Rating criteria hierarchy
  • Corporate rating methodology
  • Sector criteria and key drivers
  • Issuer Default Rating (IDR) and relative notching for an issue rating
  • Application: Assign an IDR to an investment grade company

Corporate Rating Criteria

Industry risk and operating environment and sector caps

Company profile

Management strategy and corporate governance

Ownership, Support and Group structure

Financial profile

  • Cash flows and earnings
  • Capital structure
  • Financial flexibility
  • Contingent liabilities and pensions
  • Accounting
  • Projections and through-the-cycle ratings

Limitations of corporate methodology, event risks

Application: Case Study Part 1 - Assess sector and business profile

(NB for an intensive and in depth application of the corporate risk analysis we suggest our Corporate Credit Analysis course)

Credit Metrics

  • Cash Flow measures: FFO, CFO, FCF, Operating EBITDA(R)
  • Short-term liquidity measures
  • Debt service
  • Coverage ratios
  • Leverage measures
  • Sector information
  • Application: Case Study Part 2 - Calculation of adjusted key credit ratios and assignment of the IDR

Issuer

  • Parent and subsidiary linkage framework
  • Rating linkages where there is partial or full government ownership
  • Rating a non-financial corporate above the country ceiling
  • Leveraged finance: defining the restricted issuer group
  • Special vehicles: Real Estate Investment Trusts, Asset Backed Securities, Project and Infrastructure Finance

Issue

  • Corporate capital structure and creditor ranking
  • Rated instruments in the funding structure ( e.g. Senior secured, Senior unsecured, Commercial paper, Subordinated, Junior subordinated, Preferred stock, Guaranteed, Subordinated secured)
  • Recovery analysis methodology: rating the issue
  • Hybrid capital and the features that drive the assignment of “equity credit”
  • Leveraged Finance: Shareholder loans and PIK instruments
  • Sukuk or Islamic Bonds
  • Application: Determine the recovery ratings and issue ratings for a high yield issuer

Fitch Rating Navigator

  • Overview of ratings report, navigator companions and navigator reports
  • Application of the interactive FitchRating navigator tool

Case study application – desk based rating assessment

  • Assigning the IDR and issue ratings for a high yield issuer

Who should attend

Financial professionals involved in corporate credit risk, rating advisory, debt capital markets origination, portfolio risk management and fixed income investors. An understanding of corporate financial statements and credit ratios is essential for this course.

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