Nordic Credit Rating (NCR) today published final amendments to its Corporate Rating Methodology for assigning issue ratings (§53–64). The amended criteria aim to improve transparency and clarify the impact of debt relative to earnings and/or asset values on the recovery prospects of debt instruments. Furthermore, the amended criteria improve the alignment of the recovery-based method for issuers rated 'B+' and below and the principle-based method for issuers rated 'BB-' and above.
Summary of amendments
The 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.
Adjustments following request for comments
Following publication of the initial draft of the amended criteria on 23 Mar. 2023, NCR has made minor adjustments to the criteria, mostly to clarify our approach to assigning issue ratings to corporate issuers in asset-heavy sectors (excluding real-estate and investment holding companies). These adjustments do not, however, fundamentally change the approach of the initial draft.
Key adjustments to the initial draft criteria are:
- clarification of the timeframe considered when assigning issue ratings; and
- clarification that alternative metrics for notching senior unsecured debt may be considered for issuers rated 'BB-' and above in asset-heavy sectors.
Comments from market participants in response to the request for comment on the draft criteria are available here.
Impact on published ratings
The amendments will result in revisions of issue ratings for some, but not all, issuers, particularly investment grade issuers with low leverage. No long-term or short-term issuer ratings will be affected by the amended criteria. All corporates with ratings on outstanding senior unsecured instruments have been placed 'Under Criteria Review' (UCR) and assigned a UCR identifier until outstanding issue ratings are reviewed under the new criteria. We aim to review outstanding issue ratings and resolve the UCR status as soon as possible, and no later than six months after publication of the final methodology.
The entities assigned a UCR identifier are available at:
NCR's methodologies are available at:
This statement does not constitute a rating action.