Rating Services Offered
GCR rates the full spectrum of security classes and employs the largest team of rating analysts in Africa. Operations are split into four key rating units:
1) Financial Institutions: namely banks and non-bank financial institutions, which includes banks, building societies, discount houses, leasing companies, corporate intermediary financing companies, microfinanciers, third party collection companies, investment companies (holding level and subsidiaries), servicer quality ratings, fund and asset manager ratings. view
2) Insurance: namely short term insurance, assurance, reinsurance and healthcare. view
3) Corporate and Public Sector Debt: namely corporates & industrial borrowers; property funds; parastatals, utilities, state governments & local authorities. view
4) Structured Finance & Securitisation. view
GCR publishes various types of ratings, which can be categorised into credit ratings and non-credit ratings.
Non-credit ratings relate to opinions on operational and financial strength and includes credit assessments, servicer quality, asset manager management quality and funds ratings.
GCR’s credit ratings provide a forward looking opinion on either 1) the relative ability of an entity to meet its financial obligations as they fall due (issuer credit rating) or 2) the creditworthiness of an obligor with respect to a specific financial obligation, class of financial obligations or a specific financial program (issue/instrument credit ratings). GCR’s credit ratings are designed primarily to provide relative rankings relating to overall creditworthiness. The ratings are not measures of absolute default probability. Creditworthiness encompasses the likelihood of default, and talks to the ability and willingness of an issuer to meet its financial obligations in full and on time.
GCR accords both long term and short term credit ratings. Short term credit ratings are generally assigned to obligations considered short term in the relevant market, typically with an original maturity of no more than 365 days. Accordingly, long term credit ratings relate to financial commitments with maturities of longer than 12 months.
GCR accords both National and International scale ratings and clearly specifies which is being rated on the front page of each rating report. Additionally, national scale ratings are denoted by a special identifier for the country concerned. The rating methodologies and rating scales utilised in the accordance of both types of ratings are very similar, but the key difference is that one scale measures the capacity to meet obligations relative to a global peer group, while the other measures capacity to meet obligations relative to the lowest credit risk within a country. An explanation of the different types of ratings accorded can be found on GCR’s website.
GCR receives compensation for assigning solicited credit ratings. Such compensation is paid by the entity soliciting the rating. Fee structures are summarised in a credit rating contract, which is discussed and finalised before the commencement of the credit rating process. Contract discussions may only be held with GCR’s business development officer, whose details are available on the website. GCR charges an initial rating fee at the time of the initial rating exercise and an annual surveillance/maintenance fee subsequently for such time as the credit rating remains in issue. Fees in all cases are negotiated by the business development team, and this team is not involved in any ratings activities. Rating fees are determined by various factors including, but not limited to, the complexity of the assignment and the type of rating required, and range between R100,000 to R700,000. The business development team may alter the fee structures for volume Issuers and other entities.
How Long Does the Process Take
The time taken to accord a credit rating can vary and will for example depend on the time taken by the rated entity/issuer and/or its agents to meet information requests. A full credit rating process typically takes between 6 and 8 weeks, although longer or shorter periods may apply depending on the circumstances.
Credit Ratings Process and Timelines
Allocation of a lead and backup analyst
The credit rating process begins with the allocation of the lead analyst and, where relevant, a backup analyst. The analysts are responsible for:
• Gathering information from and conducting meetings with the rated entity/issuer and/or its agent;
• Performing credit analytics and compiling a credit rating report, as well as a ratings panel pack;
• Presenting the results and a credit rating recommendation to a ratings panel;
• Communicating credit rating actions to the rated entity/issuer and
• Communicating the credit rating actions to the market (in cases of public ratings).
At no time may the analyst, or any other person involved in the rating process, make proposals, recommendations or give advice, either formally or informally, on ways to improve the rating, including the design of structured finance instruments or any other aspect of the rating on which the credit rating agency is expected to issue a credit rating.
Gathering of information and conducting of meetings
At the start of the credit rating process, the analysts will compile a list of requested information to be provided by the rated entity/issuer. After having received the information, the analysts will schedule meetings with relevant senior management of the rated entity/issuer to discuss issues material to the credit rating. GCR may also liaise with agents such as accountants and lawyers to discuss relevant matters.
Analysis of the information and according of the credit rating
GCR’s analysis and credit rating actions are based on information provided by the rated entity/issuer and/or information available from other sources known to it and believed to be relevant and reliable. GCR’s analysts may have access to confidential information obtained during the credit rating process. Such information will be treated in accordance with GCR’s “Confidential Information Policy”.
The analysts will use the information received and obtained during the meetings with management to compile a credit rating panel pack, which will include the credit rating report, and present the pack together with a credit rating recommendation to a ratings panel. Such ratings panel is conducted in accordance with GCR’s “Principles for the Conduct of Ratings Panels Policy”.
GCR’s credit ratings are accorded and monitored in accordance with relevant credit rating criteria or methodologies, which are available on GCR’s website. If no specific criteria apply, GCR will explain in the credit rating report what methodology has been applied to accord the credit rating.
Provision of draft credit rating report to the rated entity/issuer
Prior to distribution to the ratings panel, however, GCR will provide a draft copy of the credit rating report to the rated entity/issuer and/or its agent. GCR will allow the rated entity/issuer five (5) working days to provide factual comments and corrections, as well as identify any confidential information for removal from the final version of the report. Allowances for time extension will be made under exceptional or justifiable circumstances. This strict policy is applied to ensure that time sensitive information is released to the market in a timely manner. Any proposed changes that relate to 1) factual errors 2) confidential information or 3) reflects concerns or misunderstandings will be discussed between the analyst and the rated entity/issuer prior to distribution to panel members.
Communication of credit rating actions to the rated entity/issuer
Following the rating panel, GCR will communicate the outcome of the rating panel to the rated entity. GCR will provide a copy of its final draft credit rating report to the rated entity/issuer, and allow a further two (2) working days for the rated entity/issuer to either appeal the credit rating action, or identify confidential information that has not been omitted. In exceptional circumstances, GCR will allow an additional grace period for feedback on the final credit rating report, so long as the underlying information remains up to date (for example, budgets provided may not be older than four months), failing which renewed information must be provided to GCR and a further ratings panel convened, if necessary.
If the credit rating is a public credit rating, a credit rating announcement will accompany the credit rating report.
A rated entity/issuer has the right to appeal a credit rating action. Such an appeal should be lodged with the relevant analysts by the rated entity/issuer in writing within two (2) workings days following the notification of the credit rating action decided by the ratings panel.
A credit rating action may only be appealed if the rated entity/issuer is able to provide additional, material factual information that would have an impact on the credit rating action. The analysts will present such additional information to a credit ratings appeal panel in accordance with GCR’s “Principles for the Conduct of Ratings Panels Policy”. The decision of the credit ratings appeal panel is final and not subject to further appeal.
Monitoring of credit ratings
Once GCR has rated and publicised a public credit rating, GCR becomes responsible to the investing public for ensuring that the credit rating remains current and relevant. For this reason, and in order to comply with regulatory requirements, all existing credit ratings must be reviewed at least once in each 12 month period (or sooner where applicable). Credit ratings may be changed, maintained, accorded a Rating Watch or Rating Outlook or placed Under Review or Withdrawn as a result of changes in, additions to, accuracy of, unavailability of or inadequacy of information, or for any other reason GCR deems sufficient.
Where a rating has been accorded for the first time, the rated entity/issuer has initial publication rights, namely the rated entity/issuer has the right to retain the rating and report as confidential. The confidential rating will be annually reviewed and maintained as confidential until such time that the rated entity/issuer provides permission for publication. GCR reserves the right to make its rating reports public if so required by regulators or prevailing regulations. In addition, GCR reserves the right to respond to questions raised by third parties to the extent the rated entity/issuer has made GCR’s rating report available to third parties or to the extent required by regulators.
Why Obtain a Rating
A favourable rating can immediately result in an increased pool of investors, can facilitate direct access to capital markets and can ultimately result in reduced funding costs. Furthermore, the extensive distribution of the detailed rating report can prove to be a highly effective complement to an organisation’s own investor relations activities.
Finally, quite apart from the rating, the process provides a useful management tool insofar as it provides management with the benefit of a knowledgeable, independent, third party opinion on the organisation and its operations (including the results of an extensive “benchmarking” process across a wide range of financial, operational and control variables).