Writing a Credit Rating Report

After you have obtained all information necessary to be able to come up with a fair and objective credit rating, it is time to come up with a Credit Rating Report which Rating Committee members will use to arrive at their individual credit ratings. A rating report will start with a Rationale which summarizes all of the positive and negative credit factors that were considered in arriving at the credit rating.

The next portion, the qualitative part, will discuss aspects like the company’s core business, industry characteristics and prospects, operating efficiency, and quality of management. The next part will focus on the quantitative aspect and will cover areas like: profitability, cash flow and liquidity, capital adequacy, and financial flexibility. After those major portions come the spreadsheets and selected financial ratios and relevant annexes.

Key to writing a credit rating report is knowing which information to include and which to leave out. Also, when including needed information, it must be tied to how it affects the company’s capability to pay its debt issue. Information is never presented for the sake of just providing information but for the purpose of helping the reader assess a particular company’s creditworthiness.

It is best to fill a credit rating report with sound opinions and observations based on facts and figures. To me, a credit rating report should neither be too short nor too long. A half- to one-page rationale and a total of 10 pages text maximum would probably be ideal.

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