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Scope publishes new rating methodology for investment holding companies and calls for comments
Scope Ratings is proposing to publish a new Investment Holding Companies Rating Methodology and is calling for comments from market participants until 3 March 2023, intending for affected corporates to be assessed under the proposed Methodology. A comprehensive set of business risk and financial risk rating drivers improves credit differentiation as it captures investment holding companies’ specifics in the credit risk evaluation.
The proposed methodology can be downloaded here or on www.scoperatings.com.
Methodology highlights
- Scope’s methodology defines main criteria to differentiate investment holding companies from a corporate group or an operating holding company such as i) the level of operational integration; ii) the investment approach; and iii) influence over core holdings.
- The assessment of an investment holding company’s competitive positioning takes into account i) the weighted average industry portfolio risk; ii) portfolio sustainability; iii) portfolio diversification; iv) portfolio liquidity; and v) investment philosophy.
- Scope’s assessment of investment holding company’s financial strength is based on credit metrics calculated using the rated entity’s standalone financial accounts as the rated entity may be unable to access a portfolio company’s cash flow or liquidity or have no influence over its dividend policy.
- The financial risk profile assessment of an investment holding company focuses on recent and forward-looking financial data. The key rating factors are the total cost cover, loan/value ratio and the liquidity assessment, especially for non-investment grade issuers.
- The new methodology is expected to have limited rating impact investment holding companies currently rated by Scope entities. As per its policies, Scope intends to place under review the issuers potentially impacted by the updated methodology as soon as practically possible. The reviews and changes to the affected ratings shall be completed within six months.
Call for comments
Scope invites issuers, investors and other interested parties to comment on the proposed methodology by 3 April 2023, as part of the agency’s ongoing commitment to transparency and open dialogue with market participants.
Please send your comments to consultation@scoperatings.com.
Scope will review and publish the content of written responses in accordance with regulatory requirements unless the respondent has explicitly requested confidentiality and will publish the final version of the methodology thereafter.