Nordic Credit Rating (NCR) today published proposed amendments to its Corporate Rating Methodology for assigning issue ratings (§53–63). The proposal aims to improve transparency and clarify the impact of debt relative to earnings and/or asset values on the recovery prospects of debt instruments. NCR's proposal improves the alignment of its recovery-based method for issuers rated 'B+' and below and its principle-based method for issuers rated 'BB-' and above.
We are requesting comments on the proposed amendments and encourage interested parties to provide direct feedback via criteria@nordiccreditrating.com by 28 Apr. 2023. We will review all comments received, with the intention of publishing an anonymised summary of comments and the final criteria once complete.
Summary of amendments
The proposed amendments to the issue rating methodology for corporate, real-estate and investment holding company issuers entail:
• a more focused approach for assigning issue ratings, accounting for gearing relative to earnings and/or asset values for issue ratings on issuers rated 'BB-' and above;
• the application of principle-based notching for issuers rated 'BB-' and above;
• the clarification of recovery-based notching for issuers rated 'B+' and below; and
• greater transparency about how we assign issue ratings.
Impact on published ratings
The amendment would impact some, but not all, outstanding issue ratings for corporate issuers, particularly on investment grade issuers with low leverage. Upon finalisation of the methodology, all corporate issuers with rated instruments will be placed on Under Criteria Review (UCR) and assigned a 'UCR' identifier to reflect the potential for changes to their issue ratings. All ratings placed on 'UCR' will be reviewed as soon as possible and no later than six months after publication of the amended methodology.
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com