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Moody’s in Central and Eastern Europe
Guide To Ratings
Methodologies
National Scale Ratings

Moody’s Investors Service prides itself on serving the needs of its Central and Eastern European customers through a combination of local expertise and global experience, while ensuring consistency with other Moody’s offices worldwide. Our team consists of highly trained and experienced regional and industry experts dedicated to providing the best service to both our existing and potential customers, and market participants, recruited from cross-cultural backgrounds, both linguistically and professionally.

 

Moody’s rates and publishes independent credit opinions on fixed-income securities, issuers of securities and other credit obligations. We rate debt obligations in the areas of Banking, Corporates, Project Finance, Sovereigns, and Regional &Local Governments and Supranationals, Structured Finance, Insurance and Managed Funds.

 

In an environment in which global financial and capital markets depend more than ever on accurate and objective credit information, Moody's ratings provide crucial benefits and valuable opportunities for both issuers and investors.

 

For issuers, such benefits include wider, stable and more flexible access to global financial and capital markets, implying lower funding costs and greater liquidity.

 

Investors use Moody’s ratings to help price the credit risk of fixed-income securities or debts they may buy, sell or lend. The values of Moody’s ratings are not limited to the time of any initial purchase decisions, but extend throughout the lives of rated instruments.

 

Furthermore, investors rely on Moody’s expertise and global focus for ongoing monitoring, opinion updates and rating adjustments. Many market participants use Moody’s ratings as a means of expanding their investment horizons to markets or security types they do not cover with their own analyses.

 

Moody’s is committed to meeting the growing demands of Central and Eastern Europe’s credit market participants. Our experience, both locally and globally, means that we can tailor our products and services accordingly.

This section provides important information about the Moody's rating process for issuers or prospective issuers of debt. Our Business Development Team is available by phone, e-mail, or for one-on-one meetings to answer all of your questions about the rating process, such as: How long does the rating process  take? What information do I need to provide? What sort of rating will I get? Is confidentiality assured?

 

If you have questions about our procedures or would like to engage us for a rating, please contact the relevant member of our Business Development Team below, or scroll down to learn more about the Moody's rating process.

 

 

Key Contacts in Central and Eastern Europe:

 

 

Czech Republic
PRAGUE
Moody’s Investors Service EMEA Limited, Czech Branch
Washingtonova 17
110 00 Prague 1
Czech Republic
T +420 224 222 929   
F  +420 221 666 378

 

Petr Vins
Branch Manager
Moody’s Central and Eastern Europe
Countries Covered: Albania, Bulgaria, Czech Republic, Romania, Serbia, Slovenia and Slovak Republic
T +420 221 666 312
petr.vins@moodys.com

 

Piotr Janczak
Branch Manager
Moody's Poland
Countries Covered: Bosnia & Herzegovina, Croatia, Estonia, Hungary, Lithuania, Macedonia, Montenegro, and Poland
T: +48 22 449 01 59
piotr.janczak@moodys.com

 

Jan Vicher
Associate Business Development
Relationship Management, Commercial Group
T +420 221 666 201+420 221 666 201
jan.vicher@moodys.com

 

Anna Burel
Assistant Vice President
Head of Account Management E - EMEA
Relationship with existing clients in Central and Eastern Europe
T + 44 20 7772 5343
anna.burel@moodys.com

 

David Aldrich
Associate Managing Director - Head of Relationship Management - E - EMEA 
Relationship Management - Emerging Markets (E - EMEA)
T +44 20 7772 1743
david.aldrich@moodys.com

 


_________________________________________________________________

 

• First-Time Rating Process
• Our Rating Methodology
• What To Expect From The Moody’s Rating Relationship
• The Value of Ratings To The Rated

 

 

 

First-Time Rating Process

 
Obtaining a Moody's rating is an active, ongoing dialogue between the issuer and our analysts. As an issuer, you naturally play a critical role in the rating process, which is transparent and entails an open dialogue about our views, processes and conclusions. Once issued, our ratings are continuously examined and updated through dialogues and regular meetings in which you are encouraged to raise any concerns and present all materials that you believe are pertinent to our analysis.

 

If you are new to Moody’s, the rating process begins with an introductory meeting. An associate from our Business Development team will introduce Moody’s procedures and discuss the specific sorts of data that will be most useful in developing an understanding of your organization. Our goal at this point is to ensure that you understand our approach to credit analysis and the types of information that will be most important to us. We will also share with you our sector experience via relevant methodologies with transparent description and scorecards.

 

Moody’s concentrates on several essential elements relevant to your long-term and short-term risk profile. Typically, we find that this information is already available internally and is not dissimilar to the sort of information that you might present to senior management.

 

Meeting with management


The initial analytical meeting often takes place at your head office and typically lasts a full morning or day including site visits. Moody’s will discuss any issues that you deem relevant. For example, for an industrial company we would tend to focus on the following subjects:

 

• Background and history of the group and the specific entity that will issue the debt.
• Corporate strategy and philosophy – usually presented by the senor management
• A full analysis of business risk including industry analysis, competitive position, cyclicality and seasonality, vulnerability to technical changes, and regulatory environment.
• A detailed analysis of the company's financial risk including (1) cash flow stability and predictability and the ability to service debt obligations, (2) operating margin development and outlook, (3) the cost structure and the ability to drive efficiencies, and (4) a balance sheet analysis in terms of debt profile and liquidity. This analysis is forward-looking and would include a review of company’s financial projections.
• An analysis of the management team both in terms of their strategic vision for the company going forward and track record and ability to successfully execute that strategy.

 

Committee's rating decision

 

Following the management meeting, the analytical team undertakes further due diligence – generally in consultation with the company’s finance team – and ultimately makes a recommendation to a rating committee specifically constituted for your company. This tends to consist of the relevant industry specialists, regional Managing Directors and other relevant credit specialists within Moody’s.

 

Rating process timeline


Typically the entire rating process, from your preliminary discussion with us to the public release of the rating, takes about 90 days. We are sensitive to the many concerns you may have about timing and can adjust the process to accommodate tighter financing schedules and other needs.

 

Rating dissemination

 

Once our rating committee has made its decision, you will be informed of the rating and our rationale. If you decide to proceed, the new rating is distributed by press release simultaneously to the major financial media worldwide. It is our practice to release rating opinions before each issue sells so that investors may use them in their purchase decisions. A detailed description of your organization, the rating rationale and the specific rated issue will also appear on our web site and in various Moody’s publications.

 

Please note that we provide unrated European rating applicants with the ability to determine whether or not their ratings will be made public. We recognize that issuers' trust in the confidential nature of our relationship is an essential component of the rating process. We fully appreciate and understand the necessity of keeping the information in our possession confidential at all times and we make every effort to do so.

 

 

 

Our Rating Methodology

 

Moody's analyses all relevant risk factors and viewpoints in arriving at a rating opinion. Several analytical principles guide that process.

 

1. Focus on the long term – Our analytical focus is on fundamental factors that will drive an issuer's long-term ability to meet debt payments, such as major economic downturns, a radical change in management strategy, or major regulatory developments. Our ratings are not intended to ratchet up and down with business or supply-demand cycles or to reflect short-term market movements.
2. Emphasis on stability and predictability of cash flow – One of our main concentrations is on getting behind the drivers of cash flow generation and, in particular, the predictability and sustainability of cash flow. We will examine financial projections in detail and endeavor to understand with you the key assumptions behind the projections. If appropriate, we will undertake sensitivity analyses on management base cases and build into the model a modest economic downturn to help determine cash flow resilience.

 

Specific risk factors likely to be weighed in a given rating will vary considerably by sector. Detailed methodology reports for all major sectors we follow can be obtained through our Relationship Management Team and on the Rating Methodology section of the site.

 

 

 

What to Expect from the Moody’s Rating Relationship

 

We understand that issuers want timely and clear responses to their questions and concerns. We know these are essential elements of a positive professional relationship. To that end, we have developed some best practices for our analytical teams.

 

• Moody’s team of analysts will contact you in advance of the meeting to inform you of the meeting  agenda and to ask for  your agenda topics, inform  you about the meeting participants from Moody’s, as well as confirm the meeting time and place.
• Moody’s analysts will come prepared in advance, having read latest information about your organisation such as the company presentation and the  quarterly financial statements.
• We will strive to ensure that you know where we stand on key credit issues for your organisation (both, advantages and disadvantages), our credit rating outlook and the most important factors that influence your rating level.
• We will make sure that you are familiar with our rating methodologies and absorb your insights.
• We will listen carefully to your company presentation and your view on the industry.
• We will keep open minds.
• We will answer your questions in prompt and professional manner.
• We will understand your securities issuance and other deadlines, and strive to meet them.
• We will follow up after meeting to ensure matters remain on track, and that you recieve answers to your questions.

 

We encourage you to evaluate us on how we are meeting up on these commitments. We value our customer opinion and therefore, ask you to take a moment of your  time  to let us know your satisfaction with our services to improve our customer services.

 

 

 

The Value of Ratings

 

There are many reasons why investors use credit ratings not only as a tool on the capital markets among issuers. For many investors, ratings are a critical element in pricing securities and are often used as a benchmark for setting investment guidelines. By providing acknowledged, globally comparable opinions on credit risk, Moody’s ratings help expand  investment horizons to a wider variety of market segments inlc. banking, insurance, pension or mutual funds sectors.

 

Wider access to capital


Since, our credit opinions have been widely disseminated, broadly used and clearly understood and accepted by institutional investors. Ratings can open an issuer’s debt to a wider range of potential buyers. In today’s global markets, a rating is in effect a “credit passport” that can provide access to international pools of debt capital in, for instance, markets where an issuer is not well known or where investors may not be familiar with the issuer’s language, its business culture, or its accounting conventions.

 

Financing flexibility


Access to a wider capital market typically translates into reduced funding costs, particularly for higher-rated issuers. The credibility of our ratings may also allow rated issuers to enter the capital markets more frequently and more economically and to sell larger offerings at longer maturities.

 

Market stability

 

Ratings and the reports on the research behind our opinions help Moody’s issuers to maintain investor confidence, especially during periods of market stress. For example, news could adversely affect the prices of a company’s outstanding bonds, even if the news has no real impact on the bonds' long-term creditworthiness. The reassurance of a Moody’s rating and accompanying analysis of the situation helps alleviate investor concerns.

Moody’s is proud to present its transparent rating methodologies below. Each Rating methodology includes decsription of major factors influencing creditworthiness of issuers in individual sectors and is accopmanied by a scorecards, which summarize the major factors and enables quick and clear understanding of Moody’s view on rated issuers.

 

The list of Moody’s rating methodologies could be found on the link below. It represent a comprehensive list of methodologies covering majority of Moody’s rated issuers worldwide.
In case you are not clear about the proper rating methodology for your company, please contact members of our Relationship Management Team.

 

Methodologies

 

A National Scale Rating (NSR) represent a tool for differentiation in creditworthiness of domestic issuers within one particular country. Although not suitable for international investors, this service may be of interest of several domestic issuers and bankers or investors active in domestic capital markets. Moody’s offers NSR in the Czech Republic and Slovakia in the region of Central and Eastern Europe.


 

 

Description:

 

A National Scale Rating (NSR) is a ranking of relative creditworthiness (including relevant external support) within a particular countryand uses the Moody's rating symbols modified with an ".nn" country marker, as in Aaa.cz for the Czech Republic. They are not designed to be compared across countries; rather, they address relative credit risk within a given country. Investors requiring internationally comparable ratings should use Moody's global ratings.

 

Moody's uses NSRs in domestic markets (i) where Moody's global rating scale is inconsistent with local scales already embedded in investment and regulatory guidelines, as is the case in the Czech Republic or Slovak Republic, Mexico, Taiwan and elsewhere; or (ii) where global rating scales provide inadequate differentiation among credits within a country, often the case when political or economic risks dominate and thereby obscure firm or security-specific risks within a global-scale rating category.

 

Moody's constructs a national scale by defining as Aaa the lowest-risk tier of credits in a country and as C the highest-risk and then ranking and distributing the remaining companies across the entire scale. Where a local scale is already in wide use, Moody's may start with that scale to calibrate its own national scale in order to eliminate the composition and calibration of the scale itself as a source of rating differences among agencies.

 

Loss expectations for a given national scale rating will generally be higher than for its global scale equivalent. Thus a credit at the low end of investment grade on a national scale will carry a higher expected loss than its equivalent on the global scale.

 

 

To find more about Moody’s NSR in Central and Eastern Europe, look at the attached NSR Methodologies or contact members of our Relationship Management Team.

 

National Scale Ratings in Slovakia

 

National Scale Ratings in the Czech Republic

 

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