Summary: Corporate Debt Restructuring

Table of Contents
1. Corporate Debt Restructuring - Interdisciplinary Issues in Indian Commerce
2. Credit rating - what it is
3. Origin and history
4. credit rating agency - definition
5. Key functions of credit rating agencies
6. Corporate credit ratings - global context
7. Credit rating agencies in India - main agencies
8. What ratings mean for investors
View more

Corporate Debt Restructuring - Interdisciplinary Issues in Indian Commerce

Credit rating - what it is

• A credit rating is an opinion on a firm's credit quality - its ability to repay debt on time.
• Ratings summarize complex credit information so economic decision-makers can judge credit risk without re-evaluating underlying data.

Origin and history

• Credit rating began in the USA in 1909 when Moody's started rating bonds.
• In India the practice began with CRISIL, India's first credit rating agency, which commenced operations in the late 1980s and has its head office in Mumbai.

credit rating agency - definition

• A credit rating agency is a company that assesses and assigns ratings to debtors (large borrowers, including companies and governments) to predict their ability to repay debt and the chance of default.

Key functions of credit rating agencies

• 1. Low cost information - collect, analyse and present complex data in a clear form.
• 2. Provides a basis for suitable risk and return - ratings build investor confidence and indicate instrument risk.
• 3. Helps in formulation of public policy - professionally rated instruments help decide eligibility for institutional portfolios.
• 4. Provides superior information - independent agencies with trained staff and non-public information deliver higher quality insights.
• 5. Enhances corporate image - better ratings improve visibility and reputation in the industry.

Corporate credit ratings - global context

• The European Central Bank recognizes four global agencies for collateral purposes: S&P, Moody's, Fitch and DBRS.
• These agencies assign ratings to companies and their financial instruments (for example, bonds).

Credit rating agencies in India - main agencies

• 1. CRISIL - India's first rating agency; operates from multiple countries (including India, US, UK, Singapore, China, Poland, Argentina, Hong Kong) and is headquartered in Mumbai; provides ratings, analytics, solutions and research.
• 2. ICRA - established in 1991; headquartered in New Delhi; Moody's is the majority shareholder of ICRA.
• 3. CARE - established in 1993; headquartered in Mumbai; one of the partners of international rating agency ARC Ratings and is among India's largest rating agencies.

What ratings mean for investors

• Agency analyses give investors valuable insights for research and for judging opportunities and risks in securities.
• Understanding an agency's history and methodology helps assess the quality of its ratings.
• Some investors compare ratings from multiple agencies to increase confidence in ratings.