- Ratings Services
- PF Loan Rating
PF Loan Ratings first produce Project Rating, the fundamental credit quality of a project, based on project risk analysis and financial projections, and assess credit enhancement quality, potential change in lenders’ creditworthiness, collateral value and relative seniority of loans to analyze recovery rates and assign final rating. An agreement is signed to provide annual ratings through the maturity of the loan based on reviews conducted more than once a year.
Developers seeking financing for new business, companies or individuals that need financing for acquisitions, financial institutions or loan syndicates that are considering roll-over of loans, and developers that want to participate in private funded infrastructure projects can utilize Korea Investors Service’s PF Loan Ratings. They can obtain better access to financing and facilitate speedy and efficient decision making process. As for syndication, rating systems that differ by financial institutions can be standardized through Loan Ratings. PF Loan Ratings help facilitate secondary market through increased loan liquidity and can be benchmarked when financial institutions apply for approval to use an Internal Ratings Based (IRB) Approach.
PF Loan Ratings use the same rating scale and definitions as unsecured corporate bond ratings. The scale is composed of 10 broad rating categories from AAA to D that indicate different levels of debt service capacity. AAA through BBB ratings are classified as investment grade, which indicates adequate debt service capacity, whereas BB through C ratings are classified as speculative grade, which indicates substantial vulnerability to changes in the external environment.
| AAA | An 'AAA' rating indicates the strongest capacity for timely repayment. |
|---|---|
| AA | An 'AA' rating indicates very strong capacity for timely repayment. This capacity may, nevertheless, be slightly inferior than is the case for the highest rating category. |
| A | An 'A' rating indicates strong capacity for timely repayment. This capacity may, nevertheless, be more vulnerable to adverse changes in circumstances or in economic conditions than is the case for higher rating categories. |
| BBB | A 'BBB' rating indicates that capacity for timely repayment is adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. |
| BB | A 'BB' rating indicates that the capacity for timely repayment is currently adequate, but that there are some speculative characteristics that make the repayment uncertain over time. |
| B | A 'B' rating indicates lack of adequate capacity for repayment and speculative characteristics. Interest payment in time of unfavorable economic conditions is uncertain. |
| CCC | A 'CCC' rating indicates lack of capacity for even current repayment and high risk of default. |
| CC | A 'CC' rating indicates greater uncertainties than higher ratings. |
| C | A 'C' rating indicates high credit risk and lack of capacity for timely repayment. |
| D | A 'D' rating indicates insolvency. |
※ '+' or '-' modifier can be attached to ratings through AA to B to differentiate ratings within broader rating categories.
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 possible change to incorporate changes in factors that affect the issuer’s credit quality.
Global rating agencies, including Moody’s Investors Service, have used the Watchlist as an important part of their ratings processs to meet investors’ needs for timely rating updates.
A rating may be put on KIS Watchlist for possible upgrade, downgrade, or occasionally with direction uncertain along with the rationale behind such Watchlist placements in order to provide investors with an indication of the likely direction.
- Possible Upgrade : When there are factors that warrant potential rating upgrade
- Possible Downgrade : When there factors that warrant potential rating downgrade
- Direction Uncertain : When there are factors that warrant potential rating change but the direction is unclear
