Michael Borgani, Director Fitch Ratings Date: April 24, 2006

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Presentation transcript:

Michael Borgani, Director Fitch Ratings Date: April 24, 2006 Credit Analysis Michael Borgani, Director Fitch Ratings Date: April 24, 2006

Credit Ratings—Terminology The Rating Process—Methodology Summary www.fitchratings.com September 3, 2019

What is a rating? Notation summarizing the likelihood of a repayment for a specific debt obligation Letter Category: AAA, AA, A, BBB,…. “+” and “-” specify placement with the category: AA+, AA, AA-, A+, … Band of credit quality www.fitchratings.com September 3, 2019

A Rating Is NOT… A judgment or statement regarding any aspect of public policy A political statement in favor of or against a particular person or administration A dictate of what should be done or how a matter should be handled www.fitchratings.com September 3, 2019

To Rate Or Not To Rate Increase investor acceptance Current economic environment Current capital market environment BOTTOME LINE: Lower interest cost! www.fitchratings.com September 3, 2019

The Rating Process www.fitchratings.com September 3, 2019

Overview The Beginning: Decision and documents The Middle: Let’s Talk The End: Rating committee, communication, and dissemination Appeal process, if necessary www.fitchratings.com September 3, 2019

Other Rating Agency Products (at least at Fitch) “Look See” Credit Assessment www.fitchratings.com September 3, 2019

Elements of Tax-supported Credit Debt and Capital Plan Economic Factors Financial Factors Management www.fitchratings.com September 3, 2019

Management, Management, Management! Importance revealed through Fitch’s default study Written, adopted policies Policy monitoring, implementation www.fitchratings.com September 3, 2019

Management Best Practices--Debt Affordability guidelines Pay-as-you-go practices Amortization considerations Multi-year CIP Operating cost considered Contingency Planning www.fitchratings.com September 3, 2019

Management Practices--Finance Fund balance/reserve goals Multi-year forecasting Mid-year monitoring and budget adjustment Use of non-recurring revenue Contingency planning www.fitchratings.com September 3, 2019

Management Best Practices—Also Think About Taxpayer/voter communication Labor relations Intergovernmental relations/cooperation Public/private partnerships www.fitchratings.com September 3, 2019

Additional Credit Elements for Lease Financings When a bond is not debt? Project essentiality Legal structure—Covenant to budget and appropriate Construction and completion risk Abatement Evidence of support Reliance on lease financing www.fitchratings.com September 3, 2019

Rating Tips Tip #1: Timing is everything (well, almost) Tip #2: Honesty is the best policy Tip#3: Seek and ye shall find (ask the analyst) www.fitchratings.com September 3, 2019

Fitch Ratings www.fitchratings.com New York One State Street Plaza New York, NY 10004 +1 212 908 0500 +1 800 75 FITCH London Eldon House 2 Eldon Street London EC2M 7UA UK +44 207 417 4222 Singapore 7 Temasek Blvd. Singapore 038987 +65 6336 6801 The Fitch Group Fitch Ratings Algorithmics Fitch Training