Euler Hermes Rating is requesting comment from market participants on its proposed methodology for rating non-financial Small and Medium Enterprises and Mid-Caps (SMEs) in Italy under its brand TRIBRating. For SMEs, the proposed methodology will replace the Issuer Rating Methodology currently in use to rate Italian corporate debt issuers.
In the proposed methodology, Euler Hermes Rating introduces a scorecard that describes the analytical considerations for rating these SMEs. The scorecard clearly outlines the weights assigned to those analytical considerations and provides guidance on how Euler Hermes Rating will score the various elements. Euler Hermes Rating also describes how factor scores will map to the scorecard outcome.
Euler Hermes Rating expects that the methodology, if implemented as proposed, will result in few, if any, changes to SMEs’ issuer-level ratings. Upon publication of the final SME Rating Methodology, Euler Hermes Rating will review all ratings assigned to this group of corporates and, where relevant, will notify market participants of any resulting rating actions.
This methodology is based on the analysis of the Italian SME market and a comprehensive experience of assessing the risk of SMEs in Italy. Quantitative elements of this methodology are built on data and statistics of approximately 49,500 companies with financials over the 2005-16 period and revenues typically between €10 million and €500 million.
- The analysis includes a dedicated scorecard for non-financial SMEs in Italy.
- The scorecard consists of three fundamental factors (sector profile, business profile, financial profile) and four notching adjustments (liquidity, debt structure, strategic and operational management, governance and financial policy).
- Other rating considerations are taken into account for the final rating, such as legal structure and external influence, reporting and transparency, event risk and limiting factors.
The proposed SME Rating Methodology is available at Request for Comment.
As part of a continuing and open dialogue with issuers, investors and other interested parties, we invite market participants to comment on this methodology by July 14th, 2018 by submitting their comments to email@example.com.
This proposed methodology was developed with Moody’s Investors Service (MIS) as part of its previously announced collaboration with Euler Hermes to provide credit ratings for small- and medium-sized enterprises (SMEs) across Europe.
About Euler Hermes Rating
Euler Hermes Rating GmbH (Euler Hermes Rating) was founded in 2001 as an independent European rating agency of the Euler Hermes and Allianz Group focusing on issuer and issue ratings. Euler Hermes Rating is registered as a credit rating agency (CRA) in accordance with Regulation (EC) No 1060/2009 of the European Parliament and Council (as amended) and is considered as an external credit assessment institution (ECAI) by the European Banking Authority (EBA). Euler Hermes Rating is a subsidiary of Euler Hermes (ELE:PA), the world leader in trade credit insurance. The Moody’s group owns a minority stake in Euler Hermes Rating.
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