Izar Services

Credit Rating Advisory Services

IZAR Ltd helps companies decide whether they should be rated by a credit rating agency. Most people believe that credit ratings are only for institutions looking to borrow money. However, there are various other reasons why a company may determine it appropriate to engage with a credit rating institution to secure a rating.

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Importance of Credit Ratings for businesses

Obtaining a credit rating is beneficial for companies for several reasons:

Access to Capital

A favourable credit rating enhances a company’s ability to raise funds through various debt instruments, such as bonds or loans, at lower interest rates. Investors are more likely to invest in companies with higher credit ratings, reducing the cost of borrowing.

Investor Confidence

A higher credit rating instils confidence in investors, shareholders, and creditors. It indicates that the company is less likely to default on its debt obligations, making it an attractive investment opportunity.

Market Recognition

A credit rating provides recognition within the financial markets and among industry peers, establishing the company’s reputation as a reliable and creditworthy entity.

Negotiating Power

A strong credit rating can enhance the company’s bargaining power when negotiating with suppliers, customers, and other stakeholders.

Merger and Acquisition Activities

A credit rating can be important during merger and acquisition negotiations, as it provides potential partners or buyers with information about the target company’s financial stability.

Credibility and Transparency

A credit rating reflects an independent assessment of a company’s creditworthiness. A positive rating demonstrates transparency, financial stability, and responsible financial management, which can attract investors and stakeholders.

Access to a Larger Investor Base

Companies with credit ratings can tap into a broader pool of investors, including institutional investors, pension funds, and other large investors who often require rated securities in their portfolios.

Liquidity Improvement

A higher credit rating can improve a company’s liquidity position, as it can access capital markets more easily and at better terms.

Risk Management

A credit rating can provide insights into the company’s financial health and its potential vulnerabilities, helping management identify areas for improvement and risk mitigation.

It’s important to note that obtaining a credit rating involves a thorough evaluation by credit rating agencies, which assess a company’s financial performance, debt obligations, industry outlook, and other relevant factors. Maintaining a strong credit rating requires responsible financial management and a commitment to meeting debt obligation

Why IZAR for Rating Advisory Services?

Our team of ratings advisory experts have an in-depth understanding of the major rating agencies’ frameworks and they use this to help clients in their credit rating decision making process.

Questions that arise include which credit rating institution to use, what credit rating should be targeted, and what type of rating should be obtained (Issuer Rating, Issue Rating, Structured Obligation Rating).

Additionally, what type of credit rating agency should a company engage with? An internationally recognised credit rating agency, an eligible credit assessment institution as per Bank of Mauritius guidelines, or a FSC licensed credit rating agency?

Other considerations raised during this process include:

Capital structure optimisation
Rating transition planning
Debt capital analysis

IZAR Ltd helps clients to make informed decisions in their selection and engagement with rating agencies licensed or approved by the Financial Services Commission (FSC) of Mauritius.