The rating process usually begins when an issuer, sponsor/arranger or underwriter (or, in any of these cases, its agent) contacts a member of Credit Rating Agencies’ business and relationship management group with a request to engage the Credit Rating Agency to provide a credit rating. The rating relationship begins with an introductory meeting or teleconference call. The purpose of this meeting is to introduce the Credit Rating Agency and to provide a high-level description of the ratings process and products. After the discussion, when the issuing organization is ready to move forward, it will request the appropriate ratings application from the Credit Rating Agency. Once the issuer has signed and returned this application, the Credit Rating Agency will begin the ratings process.

The analyst or analysts assigned to a particular issuer or obligation (“lead analyst” or “responsible rating analyst”) begins the credit analysis by collecting relevant information on the Issuer or obligation from publicly available sources. Following the receipt of the request for a credit rating, analysts are selected, taking into account the industry and the type of the debt to be rated, among other factors.

The Issuer will be asked to provide relevant financial and non-financial information. The precise list of information may vary according to the sector and market information. Analysts base their rating analysis on a thorough review of information known to them and believed to be relevant to the analysis and the rating decision in accordance with the applicable criteria. The rating process incorporates information provided directly to the Credit Rating Agency by the issuer, arranger/sponsor or other third party, such as published company financial & operational statistics, reports filed with regulatory agencies, industry and economic reports as well as other data and insights

Requested non-public information can include information provided directly by the issuer, arranger, sponsor or other involved party. Confidential background data, forecasts and other communications will be gathered by the Credit Rating Agency’s analytical team. The team conducting the analysis will determine if sufficient information is available to form a view on the creditworthiness of the issuer.

The analytical team conducting the analysis will prepare a detailed questionnaire for the issuer’s management team, which typically involves to prepare main topics for discussion and key questions and to establish detailed agenda to ensure productive dialogue.

In most cases for solicited credit ratings, the issuer’s management or transaction sponsor participates in the ratings process via in-person management and treasury meetings, on-site visits, teleconferences and other correspondence. The lead analyst and the team conduct a detailed discussion with arranger, management team or sponsor to understand the business and convey the initial thoughts of the analytical team. Analysts also consider macroeconomic data, market events and any other information deemed relevant for rating analysis, such as data from an issuer’s peers, data provided by other analytical groups within the Credit Rating Agency or publicly available information. Analysts engage in frank discussions with Issuers, or their agents or representatives, about their ratings, including credit strengths and weaknesses and trends in their industries.

Once information has been gathered, the lead analyst will conduct the analysis of the issuer or obligation by applying the relevant credit rating methodologies, which may include consideration of both quantitative and qualitative factors. Since credit ratings are assigned and reviewed through a committee process, the analysis required beforehand includes a complete application of sector-specific rating criteria and methodologies. The analysts need to determine if information is robust enough to ensure they can form a view of the creditworthiness, assess key rating drivers according to applicable master or sector criteria, and develop or apply rating model where applicable.

Where a debt issue or financial structure is deemed to have unique or complex features or does not appear to have a fundamental economic purpose, a screening committee may be held to determine whether the full rating process should proceed. A screening committee is not a rating committee but is rather a cross-sector committee that provides an initial layer of review to consider such rating proposals early in the rating process. The primary purpose of the screening committee is to determine the feasibility of assigning a credit rating to such proposals, which may need a crosssector review to assess how certain credit risks should be considered and which rating criteria may be applied.

Once information has been collected and the issuer and/or securities analyzed in accordance with applicable criteria and methodologies, the lead analyst and the analytical team or the primary and secondary analyst will form a rating recommendation and document their analysis and rationale in a committee package. The committee package must contain sufficient content, consistent with the methodology and criteria that apply to the analysis, to provide a solid basis for the recommended credit rating. The package must include a summary of key rating drivers, sensitivity analysis, criteria variations (if any), and details of reasonable investigation, amongst certain other minimum content.

Committees consider the information and rating recommendation presented in the committee package, and discuss the recommendation. Committees frequently include analysts from outside the immediate asset class, sub-sector or geography since peer analysis is a central element of the process. The lead analyst will formulate his or her recommendation for consideration by a rating committee. The rating committee will also consider whether there is sufficient information to assign a credit rating. If the rating committee believes that the information available, both public and private, is insufficient to form a rating opinion, no credit rating will be assigned or maintained. Rating committees are a critical mechanism in promoting the quality, consistency and integrity of the rating process. A rating committee may adjust (or vary) the application of the criteria to reflect the risks of a specific transaction or entity. All such criteria variations are disclosed in the respective rating action commentaries, including their impact on the credit rating (if any) analysis is a central element of the process. In many jurisdictions, recognized rating agencies are only allowed to use a committee-based rating process. Therefore, credit ratings are determined only through rating committees, by a majority vote of the rating committee’s members, and not by individual analysts. Voting members are chosen based on relevant experience, with seniority and experience thresholds reflected in the committee quorum requirements. The committee considers relevant quantitative and qualitative factors, as defined in established criteria and methodologies, to arrive at the credit rating that most appropriately reflects both current and prospective performance. Consensus decision will be arrived on the appropriate rating, including, where appropriate, a rating outlook or rating watch designation.

Once a rating committee reaches a decision and the appropriate external communications have been drafted regarding a credit rating action, the lead analyst typically contacts the issuer or its designated agent to inform them of the committee’s decision. The outcome is communicated in writing to the issuer or, where applicable, its arranger, sponsor or agent (exceptions apply). In communicating the credit rating, the rating action and the principal grounds on which the credit rating is based must be explained. Typically, analysts use a draft rating action commentary or a draft presale report, which includes the committee’s ratings decisions, to convey this information. The lead analyst provides the issuer with the opportunity to review the draft rating action commentary (or presale report) to allow the issuer to check for factual accuracy and the presence of non-public information. The Credit Rating Agency evaluates this feedback from issuers while retaining full editorial control over its commentaries. If there is no agreement, the rating process might result in an unpublished credit rating. An unpublished credit rating is a credit rating of an entity, issuer or issuer obligation that is unpublished, confidential and surveilled.

The rating action is published after meeting the country’s issuer communication requirements. Credit ratings are communicated to the general public free of charge via credit rating announcements which are published on a website, and are distributed to major financial newswires.

With the exception of those credit ratings which are clearly identified as point-in-time ratings, once a credit rating has been published, the Credit Rating Agency will monitor that credit rating, as deemed appropriate, on an ongoing basis and will modify the credit rating as necessary in response to changes in the opinion of the creditworthiness of the issuer or issue. Rratings are typically monitored on an ongoing basis and the review process is a continuous one. Monitored credit ratings are also subject to a review by a rating committee, at least once annually. Certain sovereign and international public finance credit ratings are reviewed at least every six months, according to a calendar of scheduled review dates. Some states, such as the member states of the European Union, try to influence their ratings by prescribing a certain frequency of the review process. Analysts will convene a committee to review the credit rating instead of waiting for the next scheduled review if a business, financial, economic, operational or other development can reasonably be expected to result in a rating action. In some jurisdictions, however, the results may not be published easily in this case, but must follow a schedule.

The working methods of the analyst teams vary not only from rating agency to rating agency, but also within the Credit Rating Agency, especially in the case of the larger agencies. The scope and quality of the information sources used for a credit rating also vary. Furthermore, the stringency of the application of rating criteria can vary. The evidence base for ratings therefore also varies. RATING EVIDENCE scales the rating results on a scale from 0% (in the case of a completely arbitrary and random classification) to the theoretical case of 100% (the credit rating is beyond any doubt).