Nordic Credit Rating AS (NCR) today published its final Group and Government Support Methodology, clarifying its approach to ownership and government support for rated entities and defining its approach to rating holding companies and special-purpose financing vehicles.
The proposed methodology replaces the ownership analysis section of NCR's Corporate Rating Methodology and the support analysis section of its Financial Institutions Rating Methodology. These two methodologies have been republished today and their support analysis sections updated with references to the Group and Government Support Methodology, along with other, minor edits.
Methodology summary
The Group and Government Support Methodology:
- defines how NCR assesses ownership support in its corporate and financial institution ratings, updating and replacing the support/ownership analysis sections of the existing criteria;
- defines group members as either vital, significant, minor or non-essential to the owner, with guidelines on characteristics and notching;
- defines instances where operating companies may be notched above the parent;
- defines our approach to government support, with definitions of an entity's significance to government and its ownership status, as well as notching principles based on these assessments;
- defines our approach to rating special-purpose financing entities; and
- defines our approach to issuer and issue ratings on corporate and financial institution holding companies.
Changes following the request for comments
NCR did not receive any official comments on its proposal, but we have made some refinements. The final criteria differ slightly from the published proposal in that they:
- specify when owner support can come from an external owner (§7–8) or is considered within the group structure (§13–14);
- further define our approach when there are notching alternatives for group (§17) and government support (§26); and
- further define when corporate and non-financial holding companies are within the scope of the criteria (§29–30) or should be rated as separate, standalone entities.
Impact on published ratings
We do not expect the new methodology to have an impact on any published ratings. However, we have identified four rated companies and financial institutions that are government owned or otherwise affected by the new methodology, given the owner support included in their issuer rating. We have assigned an Under Criteria Review (UCR) identifier to the issuer and issue ratings of these entities.
The entities assigned a UCR identifier are:
- Bonnier Fastigheter AB and instruments issued by AB Bonnier Fastigheter Finans (publ);
- Danske Hypotek AB (publ);
- Kongsberg Gruppen ASA; and
- Svensk FastighetsFinansiering AB (publ).
All ratings placed on UCR will be reviewed under the new methodology as soon as possible and no later than six months after publication of the methodology.
NCR's methodologies are available at:
https://nordiccreditrating.com/governance/methodologies.
This commentary does not constitute a rating action.
Contacts:
Marcus Gustavsson, analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com