Thuyết trình về tổ chức xếp hạng tín nhiệm (Powerpoint+ Word)

Credit rating
agency
Group 4


I

II

introduction

In Vietnam


01.
introduction


Credit rating

The concept originated in the US in 1909
when the founder of Moody’s Investors
Service, John Moody, rated the US Rail
Road Bonds.
However, the relevance of this concept
was realized only after the great
depression when investors lost all their
money


definition

Credit rating

An evaluation of the credit
worthiness of a debtor, especially
a business, company or a
government. This evaluation is
made by a credit rating agency,
expressed in alphabetical pr
numerical symbols

Credit rating
agency
A company that assigns credit
ratings, which rate a debtor’s
ability to pay back debt by
making timely interest payment
and the likelihood of default. The
agency have brought
revolutionary changes in India
capital market by introducing
various innovations.


International agencies


meaning
Credit rating agency means a body corporate which is
engaged in the business of rating securities

offered by companies
The debt instrument rated by CRAs include
government bonds, CDs, minicipal bonds,
preferred stock, and collateralized securities, such
as mortgage-backed securities and collateralized
debt obligations


Importance of credit rating
2

1 use the
Investors
ratings to assess
the risk level and
compare the
offered rate of
return with his E(r)
to optimize hish
risk-return tradeoff

The risk perception
of a common
investor largely
depends on the
familiarity with the
names of company
and what they
might know of the
company

For the3typical
investor, it would
be difficult to
assess all of the
financial
information
available to assign
their own risk
ratings


function
Easy to understand
information

Provide basis for
investment

Gather information, analyze to
An investment rated by a
interpret and summarize
rating agency enjoys higher
confidence from investors
complex information in a
simple understood manner

Healthy discipline on
corporate borrowers

Public exposure has healthy
influence over the management
of issuer because of its desire to
have a clear image

Public policy
Once the debt guidelines
are rated, it
would be easier to
formulate public policy
guidelines


methodology
The rating is based on the investigation
analysis, study and interpretion of
various factors. The key factors
considered are listed below:
● Business analysis or Company
analysis
● Economic analysis
● Financial analysis
● Management evaluation
● Geographical analysis
● Fundamental analysis


The case of fiingroup
Main factor

Secondary factor

Sovereign risk

Economic growth
Political stability
Financial stability
Regulatory risk

Sector risk

Sector growth prospect
Sector volatility
Sector competitiveness
Regulatory risk

Business risk

Scale
Business profile

Administrative risk

Business strategy
Risk management
Human resource management

Financial risk

Operating margin

Leverage & Ability to repay


Other than those, FiinRating also looks at
variable factors. They are mostly quantitative
and considered during credit rating council
meetings
 Investment &
Acquisition strategy

 Financial
management

 Foreign exchange
 Liquidity
risk
management
 Event risk


Country’s credit rating
Country’s credit rating denotes its ability to source debt
from the international market at a reasonable cost. It
involves evaluation of:
● Economic growth and development
● Balance of trade and balance of payments
● Debt service ratio
● Debt composition
● Liquidity
● Political and internal stability

● Inflation and price stability


Credit rating
symbols


Issuer rating
AAA

Highest creditworthiness supported by many excellent factors

AA

Very high creditworthiness supported by some excellent factors

A

High creditworthiness supported by a few excellent factors

BBB

Creditworthiness is sufficient, though some factors require
attention in times of major enviromental changes

BB

Creditworthiness is sufficient for the time being, though some
factors require due attention in times of enviromental changes

B

Creditworthiness is questionable and some factors require
constant attention

CCC

Creditworthiness is highly questionable and a financial obligation
of an issuer is likely to default

CC

All of the financial obligations of an issuer are likely to default

D

R&I believes that all of the financial obligations of an issuer are in
default


long-term Issuer rating
AAA

Highest creditworthiness supported by many excellent factors

AA

Very high creditworthiness supported by some excellent factors

A

High creditworthiness supported by a few excellent factors

BBB

Creditworthiness is sufficient, though some factors require
attention in times of major enviromental changes

BB

Creditworthiness is sufficient for the time being, though some
factors require due attention in times of enviromental changes

B

Creditworthiness is questionable and some factors require
constant attention

CCC

An obligation is in default or is likely to default. The obligation in
default may not be recovered in full

CC

An obligation is in default or is likely to default. The obligation in
default may only be partially recovered

D

An obligation is in default and may hardly be recovered


short-term rating
a-1

Certainty of the fulfillment of a short-term obligation is high

a-2

Certainty of the fulfillment of a short-term obligation is high,
though some factors require attention

a-3

Certainty of the fulfillment of a short-term obligation is sufficient
for the time being, though some factors require attention in times
of major enviromental changes

b

Certainty of the fulfillment of a short-term obligation is not equal
to that of a short-term obligation rated in the “a” categories and
some factors require attention

c

The lowest rating. A short-term obligation is in default or is highly
likely to default

Legal Transaction
Degree: 10/VBHN-BTC by the Ministry of
Finance, January 18th, 2019


225,509 billion
vnd
Total value of 364 bonds issued through
private placements

9,584 billion vnd
Value of 13 plublicly issued bonds

1 billion usd
3 bonds were internationally issued


Current
situation
Despite rapid growth, Vietnam
has only 2 eligible credit
rating agencies, FiinRatings
and SaigonRatings


“Vietnamese fixed income markets are only strong
on the supply side, not the demand side. That’s
due to the lack of credit rating agencies to
increase efficiency for both supply and demand on

the market, helping investors become more aware
if financial health, ability to repay debts of issuers,
as well as the associated risks”
-the Asian development bank (ADB)


Current situation
Management
perspective

Credit rating activities in
Vietnam was still limited
since:

1,

There were no
regulation of the
obligation of rating
creditworthiness
when issuing
bonds

2,
Investors weren’t
used to investing
in bonds with
credit ratings

Improving
trust

The Ministry of Finance
proposed a law on corporate
credit ratings to slowly form a
credit rating culture for both
private placements and public
issued bonds, as well as
improving transparency of the
bond market

From Jan 1st, 2023
onwards, credit rating
is required for all large
bond issuances; bond
issued after being
listed and transacted
on the market.


According to SSI Securities, risks
associated with corporate bonds
are increasing. Mr. Dinh Trong
Thinh, banking & finance expert,
said that corporate bonds in recent
times, especially from 2020
onwards had had numerous
issues; there even were “3 no’s”
bonds – no collateral, no ratings,

no underwriter, “posing great risks
for investors”


Stage of credit rating markets
Credit rating
market
Promulgate the legal
framework

for the establishment and
operation of credit rating
agencies

Establish credit rating
agencies
establish a number of credit
rating agencies in the country
and mandate that organizations
when raising capital in the
market must have a credit
rating