What information must you be ready to give to a credit rating agency so they can do their job and evaluate your company properly? There will be a lot of details that a rating agency will be asking of your company. Typically, when you sign the credit rating agreement (or even before you do that), the rating agency will give you a list of information that you must submit. Such information can be generally classified as covering the following areas:
1. Products and Services; Markets Served - this will give them a good grasp of your core business, sources of revenues and earnings, and will allow them to gauge the over-all prospects for the sector that you serve.
2. Competitive Position - who are your competitors? What is your market share relative to theirs? Data on your position relative to the whole industry gives a good indication of how well or how poorly you are doing considering industry conditions.
3. Management and Ownership - who are your key officers? Who are the major shareholders? How strong or solid is the management team or the major owners? What are the plans of the company in the coming years? A credit rating is more prospective than historical in its view of the creditworthiness of a particular company. Getting a good sense of who are running the company and in what direction they intend to bring the company in the future are key elements when coming for a credit rating.
4. Financial Data - credit rating agencies will typically ask for 3-5 years of audited historical financial statements, as well as projections for the next 3 years (for a corporate or issuer credit rating) or for the period covered by the debt issuance. Major assumptions will have to accompany the company’s projections. These will be the bases for future discussions and for any sensitivity analysis to be done by the lead analyst. In addition to such basic information, certain breakdowns or data will be asked for, all with the view of scrutinizing the financial information that have been provided. Aside from revenue and earnings information, the rating agency will also be interested in planned capital expenditures, liquidity and cash flow, as well as the capitalization and debt profile of the company.
Credit rating agencies put a lot of weight on a company’s openness to providing needed data. If you think that your company can provide most of a rating agency’s information requests, then do consider getting a credit rating.
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