When a borrower plans to sell a security in the capital markets, it might request a credit rating agency to evaluate the issuance. Credit rating agencies evaluate potential debt securities risks which can lead to borrower repayment issues and in a drastic case, default.
Example:
The credit rating agency presentation includes, but is not limited to discussions of:
- The issuer’s management — who’s in management roles and how long they have served in those roles, etc.
- The project — why it’s needed and who benefits from it, etc.
- Economic demographics of the project’s intended users
- Issuer’s management of previous projects
- The financing’s structure, such as the length of borrowing, types of securities used in the financing, etc.
- The project’s revenue-generation ability or the issuer’s taxation ability
What’s important here?
Creating the credit rating agency presentation materials is usually a team effort between the issuer and either the underwriter or financial advisor. The issuer has the final say in what the rating agencies are presented.
After the credit rating agency presentation, the rating agency might have follow-up discussions to understand the overall financing better.
The credit rating agency presentation materials are not distributed to other parties, but portions may be used in the issuer’s marketing materials provided to investors.
