SAHA Corporate Governance and Credit Rating Services Inc. provides an independent view on the credit risk level of institutions or capital market obligations issued by such institutions by assigning a “credit rating” indicating the distance to a default event in terms of a probability of default, and acts with the following main principles:
- Independence
- Objectivity
- Analytic Accuracy, and
- Transparency
SAHA does not operate under instruction of any public or private institution and performs completely independently of any bank, investment enterprise or other financial market institutions.
What is Credit Rating?
A credit rating is an independent view on the credit risk of institutions or capital market obligations issued by such institutions. Our rating is assigned on the basis of information provided by the rated institution and acquired from other sources by our analysts. SAHA does not audit the institution, instead uses the reports of independent auditors as a source. The rating is reviewed periodically. It may be modified according to changing circumstances, or be temporarily suspended or withdrawn when access to information is not available.
A credit rating is not an offer, solicitation or advice to buy, sell or hold securities of any institution referred to, nor a judgment about the suitability of that security to the conditions and preferences of investors. Credit rating of SAHA reflects the capacity of on time fulfillment of obligations of the institutions or capital market obligations issued by such institutions.
Types of Credit Rating
SAHA can carry out “solicited rating” requested by an institution/company as well as “unsolicited rating” studies. The first is a rating study in which the company shares its operational and financial data, short and medium term plans and targets and other necessary private information as per the agreement, in addition to the publicly available data. The second is based on publicly disclosed data.
Based on demand, SAHA determines two different categories of credit rating; for issuer and for the issue itself. While the issuer rating includes the analysis of all short and long term risk factors of the relevant institution, the issue rating includes a risk analysis limited to the maturity and collaterals of the issued security.
Rating Categories
SAHA’s credit ratings are determined in two main categories as National (TR) and International (INT). The international rating is also divided into two categories as Domestic Currency and Foreign Currency ratings.
There are two separate rating assignment for each of the above categories, Short Term and Long Term. While the short-term rating covers the period of one year, which is the rating period, the long-term rating also includes future projections for a period longer than one year and aims to measure the risks extending accordingly.
The national credit rating reflects the credibility within the borders of a country and in its local currency. The international credit rating, on the other hand, includes the risk of default of liabilities for an issuer or the issue, including the sovereign risk factored in the analysis, and rates the credibility in both domestic and foreign currency. These two different ratings may vary depending on the company’s capacity to fulfill its domestic and foreign currency liabilities.
Definition of the Default Event
The Default Event is defined as the failure of a real or legal person to fulfill its financial obligations and it is the main focus of a credit rating process. The credit rating is based on quantitative and qualitative forecasts of the probability of default. Hence, how a credit rating agency defines the default event is of primary importance for public disclosure.
If one or more of the following occurs, SAHA considers this to be a default event:
- Failure to pay in entirety or part of the principal and or interest of a debt instrument issued in a way that would violate the terms of agreement;
- Attempt by the issuer to evade liability to a creditor by filing for bankruptcy or by other means, or an indictment by the creditor (ex. bank) to legal authorities to declare the debtor as bankrupt;
- A decisive decline in credit quality. For example; the assets of the borrower falls below its liabilities or the borrower goes into technical bankruptcy and has to raise capital.
- Re-negotiation of an issuer with its creditor in order to restructure, reschedule or settle its debt obligations causing adverse change in its genuine conditions or in a problematic and coercive way.
From a credit rating perspective, an event of default is an actual state rather than a legal situation and is determined independently of the legal processes carried out by the creditors. As long as the debt obligations are fulfilled in accordance with the original agreement conditions, technical and legal breach of contract may not constitute a default for SAHA.
Assignment of a Rating
SAHA assigns and discloses a credit rating result corresponding to the risk level of the institution or instrument through the quantitative and qualitative analysis methods included in its methodology. Methodology and rating criteria are covered under separate topics.
SAHA allocates a rating for an institution only when sufficient information is supplied. In this context, necessary data on the rated institution and its activities (industry and competition conditions, financial statements, growth possibilities and opportunities, strategy, budget and plans, public relations, corporate governance and legal processes, etc.) are taken into consideration. Any publicly undisclosed information provided to SAHA is stored on the basis of confidentiality rules and principles.
The reputation of SAHA as a credit rating agency depends on the acceptance and use of its final assigned ratings, in other words, its independent opinion, by investors and financial markets. In this respect, SAHA, with its methodology, its specialists and rating committee acts in strict adherence to the principles of independence and transparency and the codes of conduct.
Disclaimer
The credit rating reports edited by SAHA Inc. analysts, with their best intentions, knowledge and experience, are the product of in-depth study of the available information which is assumed to be correct and it constitutes an independent opinion about the overall credibility of the institutions. The contents of the reports and the final credit ratings should be interpreted neither as an offer, solicitation or advice to buy, sell or hold securities of any company referred to in the reports nor as a judgment about the suitability of that security to the conditions and preferences of investors. SAHA Inc. makes no warranty, regarding the accuracy, completeness, or usefulness of this information and assumes no liability with respect to the consequences of relying on this information for investment decisions or other purposes. Entire or partial publication of the Credit Rating reports thereof may not be republished, broadcast, or redistributed without the prior written consent of SAHA Inc. and the rated institutions.