Our issuer rating reflects our opinion on the financial strength of a debtor/company and its ability to satisfy its financial obligations.
CREDITWORTHINESS COMMUNICATED TRANSPARENTLY
In analysing the issuer, we examine the company’s individual business model intensively. This includes an investigation of the business risk in terms of the applicable sector risk and market and competitive position of the company as well as its cost efficiency, management, strategy and governance. In our view, these “soft” factors cannot be determined on a fully objective basis or quantified by means of a standardised process. Accordingly, we apply an analyst-based approach with analysts meeting a high profile of requirements. In this connection, our analysts see themselves as “risk analysts” in contrast to equities analysts, who tend to be “opportunity analysts”.
We assess financial risk on the basis of an analysis of the annual financial statements, examining and evaluating statements on financing structures and policies as well as profitability, cash-flow generation (cover potential) and financial flexibility.
The core of the analysis is an appraisal of a company’s general and, more particularly, future ability (and willingness) to honour its financial liabilities within the agreed periods of time (i.e. general creditworthiness). Accordingly, the aggregation of the individual business risk and the financial risk plays a key role in the assessment and analysis of the company’s forecasts and the assumptions which underlie them. After the completion of the analysis, a qualified rating committee determines the rating.