Majority of companies have to deal with rating agencies which turn out to be a core responsibility of how a company’s treasury works with its task.
To know more about this matter, here are some of the right things to do when you work with credit rating agencies. To start off, a credit rating brings various significant advantages to many corporate borrowers by increasing the field of investors who want to purchase a company’s debt, and this also helps to expand the pool of investors which are usually being reduced because of the cost of borrowing.
Credit ratings also increase the level of confidence of the company when they deal with their stakeholders that include derivative counterparties, their customers, as well as their shareholders and their regulatory board, but, from the moment the company decides to undergo towards obtaining a credit rating, regardless if it is the first time or just to have an added rating, there should be an assigned person to carefully tend to the relationship with the rating agencies, and that person is usually the treasurer of the company.
The creditworthiness of a company is a public opinion, which it becomes a vital way for an organization to establish a more systematic and a comprehensive approach in its management relations with the credit agency who are the ones who develop and create the ratings. Even the decision of the credit rating agencies to pursue a rating in the first place plays a significant responsibility which will also be a big factor for the outcome of the rating.
Usually, large corporations, particularly those that serve internationally, regularly have one or more credit rating agencies that publicly rate their creditworthiness in order for them to boost their accessibility to the debt and the capital markets to have a due diligence hong kong. Knowing that multiple credit agencies conducted creditworthiness rating, many investors are willing to put their trust to these corporations, however, this will be very costly in terms of finance and might even outweigh the benefits if not properly managed.
It is necessary or required for a company to get a credit rating because it will establish strong brand recognition, as well as provide the company access to the bond market. Majority of the investors like pension funds, financial institutions, and insurance companies are the ones that are legally able to invest in rated debts from companies. To add more, this is also an effective way to expand the group of prospective investors because a credit rating provides the company a wider range of accessibility to debt structures that have longer maturities, but acquiring a credit rating also have its own downsides as well. To give you a heads up about its disadvantage is the slow time in obtaining and maintaining the rating that its staff has to dedicate to it. Another downside is its costly rating fee.
A company should be sure that it requires a credit rating before making any rash decisions to initiate this kind of process despite the fact that it can be withdrawn, this will still have a negative effect on the market and the prospective investors.
