Issuer rating assigns ratings on issuers’ long-term debt service ability based on its ability to repay senior unsecured debts.
Issuer rating is not premised on issuance of corporate bonds, and therefore, there is no restriction on the entities that can benefit from issuer ratings. Issuer rating can be utilized by a wide range of entities to gauge their own credit standing or for diverse purposes including PR, screening of suppliers to the Public Procurement Service, and screening of constructors to be exempt from requirement of payment guarantees.
Issuer Rating is classified into Plenary Rating and Surveillance (Periodic Rating and Occasional Rating).
Issuer Rating uses the same rating scale and rating definitions as unsecured corporate bond rating. The scale is composed of 10 broad rating categories from AAA to D that indicate different levels of debt service ability. AAA through BBB ratings are classified as investment grade, which indicates adequate debt service ability, whereas BB through C ratings are classified as speculative grade, which indicates substantial vulnerability to changes in the external environment.
Issuer ratings are valid for one year from the date the ratings are assigned.
Issuer ratings are released through formal disclosure including KOSCOM, Korea Stock Exchange, Korea Securities Dealers’ Association(KSDA), Bloomberg, Reuters, Yonhap News, and major institutional investors and media.
Korea Investors Service introduced Watchlist system on November 1, 1998, which was the first among Korean credit rating agencies. Watchlist is used to indicate that a rating is placed under review for a possible rating change to incorporate changes in factors that affect the issuer’s credit quality. Many credit rating agencies in the world including Moody’s Investors Service are using a watch list as an important part of their credit rating process to meet the need of the market for timely rating updates. When a rating is placed on Watchlist, the direction of expected change (‘Possible Upgrade’, ‘Possible Downgrade’, and ‘Direction Uncertain’) is also posted.
Outlook system was introduced on September 1, 2002. Outlook indicates mid-to-long term (six months to 18 months) prospect on major rating factors at the time the rating is assigned.
Outlook is managed separately from the rating and notch. The direction of actual rating change is not necessarily the same as the direction of Outlook. Outlook is assigned on only long-term ratings. Outlook is not assigned on CP ratings, ABS ratings, ratings on debts that are currently in default, or ratings on issuers that are subject to corporate workout programs or the Corporate Restructuring Promotion Act. Outlook is not assigned to credits that are on the Watchlist.
