FAQs

What is a credit rating?

A credit rating is an informed opinion grounded in rigorous analysis of the relative credit quality of borrowers and the debt instruments they issue. A credit rating is usually conveyed by a simple alphanumeric symbol that is supported by a rationale.

A credit rating is not an audit of an entity. A credit rating is also neither a recommendation to buy, hold or sell a debt instrument, nor a guarantee of repayment on a debt instrument.

How does a credit rating differ from an audit?

A credit rating services company relies on a variety of information sources including published annual reports, meetings with the issuer's management, industry data and discussions with relevant third parties, such as bankers, regulators, industry associations and even auditors. A credit rating depends significantly on the quality of information provided to the credit rating agency. Although all reasonable due diligence is exercised on this information, it does not always amount to the kind of verification that is carried out by an auditor. Also, the credit rating process may not be able to detect fraud or misrepresentation of information something that an audit is designed to detect.

How does a credit rating services company differ from a credit bureau?

A credit bureau provides information on past debt repayments by borrowers, whereas a credit rating services company provides an opinion relating to future debt repayments by borrowers.

How will a CariCRIS credit rating benefit me?

If you are a borrower in the financial markets, a credit rating from CariCRIS helps you broaden your access to capital markets and diversify your funding sources. By using a CariCRIS credit rating you as a borrower also signal to the market a commitment to more transparent and prudent financial management. This will likely enable you to borrow at more attractive rates of interest. As an independent expert opinion from a third party, a CariCRIS rating can also enhance your credibility in the national, regional and international financial markets.

As an investor or lender in the Caribbean region, you can use a CariCRIS credit rating to easily and directly compare credit quality within Caribbean nations and across the region, based on independent, objective methodologies. This will aid efficient pricing, portfolio management and trading of securities.

Will a credit rating affect my stock price?

A credit rating is a forward-looking opinion on the quality of debt issued by an entity and not a commentary on the performance of its equity shares. Therefore, changes in credit ratings are expected to directly influence only the debt instrument with which the rating is associated. No conclusive relationship has so far been established between credit ratings and stock price movements in global markets where ratings are used extensively. However, a credit rating may certainly be one factor of many that en masse influence investors' opinions.

Why go to the market for money instead of to the bank?

The critical difference between borrowing money from a bank and borrowing from a reasonably developed debt market, is that in the case of the latter, you have access to a larger base of investors/lenders all competing for the investment. This usually has the effect of lowering the cost of borrowing. The ability to successfully access the debt markets also signals a certain level of financial discipline, and enhances credibility by indicating a company's willingness to be voluntarily more transparent and forward looking.

I hardly have any debt - why do I need a CariCRIS rating?

A CariCRIS rating is a way of expressing the creditworthiness of your company in the widely accepted and succinct language of credit rating. It is pertinent to note in this context that globally most of the highly rated companies tend to be debt averse or have relatively low levels of debt. Even if you are a debt free company, a high credit rating signals a fundamentally strong business position and management quality to all your present and future stakeholders - equity investors, prospective collaborators, business creditors, regulators, international counterparties and the public at large.

Why do I need a CariCRIS rating if I already have a global rating from S&P / Moody's / Fitch?

Global rating agencies such as Standard & Poor's, Moody's and Fitch, assess the creditworthiness of a debt instrument relative to all other debt issues and issuers worldwide when they assign global scale credit ratings. To a limited extent, for larger economies, they also assign national scale ratings where the universe of comparison is limited to debt issues and issuers within a single nation.

In the Caribbean, which comprises small national economies, there are relatively few assigned global scale ratings and they tend to be bunched at the lower end of the scale.

The CariCRIS regional scale rating assesses creditworthiness relative to all other Caribbean debt issues and issuers. Furthermore, both CariCRIS national scale and regional scale ratings include far more locally and regionally contextual issues than can a global scale rating, enabling CariCRIS to make finer credit risk distinctions among local and regional borrowers.

Therefore, by using CariCRIS ratings, you can provide your investors - regional or global - with the most relevant and comprehensive independent commentary on your company.

Why be rated on a regional and national scale? Is one more important than the other?

A credit rating is an assessment of relative creditworthiness and the choice of scale therefore depends on the comparison set that is applicable to your investment or fund raising strategies. A CariCRIS regional scale rating is relevant if you want to compare debt issues and issuers across the Caribbean region. A national scale rating is germane when the desired comparison is only for debt issues and issuers within a single nation. And, of course, for global investors or those wishing to raise funds on the global financial markets, a global scale rating is appropriate.

Can I compare a regional rating with a national rating? Can I compare a CariCRIS regional or national scale rating with a global scale rating by S&P, Moody's or Fitch?

As a relative assessment of creditworthiness, every credit rating only has meaning when compared with other ratings on the same scale. That said, a regional or national scale rating does add focus and give additional information to that conveyed by the credit rating of a debt issue or issuer on a global scale.

How does CariCRIS ensure confidentiality?

CariCRIS personnel are all contractually bound by your rating request - or rating mandate - not to disclose any non-public information without your written consent. Additionally, all CariCRIS employees and rating committee members operate under a strict and sworn code of ethics. All non-public information received from clients is kept strictly confidential and our code of conduct prevents any company personnel from using the information for personal gain.

How do I know CariCRIS ratings are fair and reliable in the absence of a track record?

Credit rating is not a precise quantitative science but in a sense an analytically rigorous art which combines quantitative analysis with sharp judgement. Recognizing this, CariCRIS has designed its operations to be backed by a tremendous pool of technical expertise and a wealth of Caribbean knowledge and experience.

CariCRIS has entered into a technical consulting agreement with CRISIL Limited out of India. CRISIL is India's premier rating agency and the fourth largest internationally after S&P, Moody's and Fitch. CRISIL, which is a strategic partner and affiliate of S&P, has also invested in the equity of CariCRIS. CRISIL successfully pioneered ratings in India at a time when credit ratings were totally unheard of and today India has the largest number of entities rated in the world, after the USA. CRISIL brings to CariCRIS not only its expertise as the largest and most successful credit rating agency in any emerging market across the world, but also its experience of providing technical assistance for establishing rating agencies in Malaysia and Israel.

As part of the technical agreement, CRISIL has used its resources to assist CariCRIS in establishing rating methodologies and to provide intensive training to CariCRIS personnel. CRISIL has also seconded members of its senior management team to CariCRIS in the initial phase to enable hands-on transfer of technical expertise and applied international best practices.

Over and above technical expertise, knowledge of local and regional environments is critical for informed national and regional scale credit ratings. Towards this end, in line with global best practices, CariCRIS has constituted an independent Rating Committee which will be at the core of its rating operations. CariCRIS's Rating Committee members are highly respected professionals with vast experience in credit, financial and capital markets, economics, business and actuarial sciences, and a wealth of working knowledge of the Caribbean and its economies.

With the available technical expertise backed by local knowledge exercised by independent professionals recognized for their integrity, CariCRIS can be considered well-equipped to assign the most objective and reliable of national and regional scale ratings.

What if I disagree with my rating?

CariCRIS will publish a rating only after the rating assigned by the Rating Committee is accepted for use by the issuer. Once a rating is assigned, CariCRIS will discuss the rationale underlying the rating with the issuer. This is done to ensure that all relevant information has been incorporated into the rating decision. If, even after discussions, an issuer chooses not to accept the assigned rating, the rating is not made public. However, once a rating is accepted and is in the public domain, any subsequent changes in the rating will also be made public, supported by a rationale. This is in line with international best practices in ratings and in the interests of transparency and investor protection.

Can I have more than one rating at a time?

Yes, you can have several ratings outstanding at the same time. This would depend on your specific requirements. An entity can have global, regional or national scale ratings for long term and short term instruments and for local and foreign currency obligations. There could also be different ratings for different long-term instruments, depending on the instrument design or structure (e.g. unsecured debt versus obligations secured by specific, pledged assets). While the rating process is common, the criteria and parameters applied for assigning long term and short-term ratings, or for foreign currency and local currency ratings, could vary in emphasis and importance.

How often are ratings reviewed?

The CariCRIS rating process is designed to ensure that its outstanding, publicly available ratings will at all times be current indicators of credit quality that reflect all relevant available information. This will be done through a process of analysis of publicly available information such as financial results, business developments as well as other information available to CariCRIS through its interface with the management of the rated entity. The detailed CariCRIS rating rationale will be updated in the public domain at least once annually, or whenever there is a rating change.

For how long is a rating valid?

A CariCRIS rating will be valid for the duration or tenure of the rated debt instrument. Once CariCRIS assigns a rating that is accepted by the client and made public, it will keep the rating under surveillance until the instrument is fully repaid. The surveillance process may result in rating changes from time to time which will be communicated publicly along with a rationale.

How much does a credit rating cost?

CariCRIS, like other rating agencies, follows a model where issuers pay for their ratings. Once accepted, a rating is freely accessible to investors and counterparties. There is an initial rating fee for first assigning a rating, and a surveillance fee for monitoring the rating over the life.