The updated methodology can be downloaded here.

Scope Ratings has today published its updated General Corporate Rating Methodology, which clarifies and refines its analytical approach while keeping the core principles unchanged.

Scope invited market participants to comment on the methodology until 16 November 2024. Scope did not receive comments from market participants during the request-for-comments period. The methodology is now final.

The update provides increased transparency and a detailed presentation of Scope’s analytical approach for assigning credit ratings to non-financial corporates. The methodology continues to be based on a modular rating approach for issuer ratings comprising an assessment of key rating factors that define a rated entity’s business and financial risk profiles, which is supplemented by supplementary rating drivers.

The rating approach on long-term debt ratings remains based on a generic notching approach for investment-grade rated issuers and a recovery analysis reflecting the value of claims at default against expected debt positions at default. The rating approach on short-term debt ratings remains based on the underlying issuer rating and its Outlook as well as Scope’s assessment on the rated entity’s liquidity position.

Rating impact and reviews

The updated methodology could have an impact on outstanding ratings:

• a negative rating impact on one issuer rating of up to one notch related to the refined assessment on an issuer’s liquidity

Summary of the key changes

The methodology includes the following adjustments:

• Guidance on capturing short- to medium term-maturity profile, longer term refinancing risks, and quality of liquidity sources under the liquidity assessment
   
• Introduction of AAA category for Scope-adjusted credit metrics
   
• Guidance on limitations of credit quality for SMEs
   
• Provision of specific factors/examples under peer context that could lead to up/downward revisions of the rating
   
• Clarification on the calculation of Scope-adjusted debt with hybrid debt instruments (notional) included in reported gross debt
   
• Enhancement of definition of sources and uses of cash for the purpose of calculating an issuer's liquidity
   
• Definition of geographical regions (Europe and World)
   
• Guidance on the impact of concentration risk on the assessment of an issuer's business risk profile
   
• Provision of additional examples of one-off/special items to be considered in the calculation of Scope-adjusted EBITDA
   
• Introduction of more detailed and prioritised eligibility criteria for an equity credit for hybrid debt instruments
   
• Definition of possible anchor points for understanding the accessibility and permanence of cash for an issuer
   
• Introduction of eligibility criteria for the inclusion of marketable securities in cash and cash equivalents
   
• Definition of parent (which could lead to a rating adjustment of the rated entity’s standalone credit assessment)
   
• Provision of examples of governance issues that could lead to downward rating revisions
   
• Provision of typical information and data sources used in the analytical process
   
• Editorial changes