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Frequently Asked Questions

What is a credit rating?

Credit ratings are an analytical result of the current credit worthiness of a rated entity or a debt issue and the rating agency’s forward looking opinions on their credit risk. As such, the higher the credit rating the stronger the credit worthiness of the Rated Target, the lower the credit rating is the weaker its credit worthiness. Credit ratings are assigned by independent credit rating agencies based on fair, objective principles, and scientific methodology. Credit worthiness of a Rated Target is evaluated on its capacity and attendance to fulfill its financial obligations within a specific period or under certain specific conditions.

What does the CCXAP’s code of credit ratings mean?

CCXAP adopts its set of credit rating codes to summarize credit rating results and opinions. To differentiate these from CCXAP’s parent company and its subsidiaries, each CCXAP’s credit rating code has a small letter “g” attached.

China Chengxin (Asia Pacific) Credit Ratings Company Limited uses simple, consistent and comparable rating codes to represent the credit strength of the rated entities and issues.

 

A.       Long-Term Credit Ratings

A long-term credit rating refers to a rating for a period of more than 12 months.

Rating Symbol

Definition

AAAg

Capacity to meet the commitment on short-term and long-term debts is extremely strong. Business is operated in a virtuous circle. The foreseeable uncertainty on business operations is minimal.

AAg+

AAg

AAg-

Capacity to meet short-term and long-term financial commitment is very strong. Business is operated in a virtuous circle. Foreseeable uncertainty in business operations is relatively low.

Ag+

Ag

Ag-

Capacity to meet short-term and long-term commitments is strong. Business is operated in a virtuous circle. Business operations and development may be affected by internal uncertain factors, which may create fluctuations of profitability and solvency of the issuer.

BBBg+

BBBg

BBBg-

Capacity to meet financial commitments is considered adequate and capacity to meet short-term and long-term commitments is satisfactory. Business is operated in a virtuous circle. Business is affected by internal and external uncertainties. Profitability and solvency may experience significant fluctuation. Principal and interest may not be sufficiently protected by the terms of agreement.

BBg+

BBg

BBg-

Capacity to meet short-term and long-term financial commitments is relatively weak. Financial commitment towards short-term and long-term debts is below average. Status of business operations   and development is not good. Solvency is unstable and subject to sustainable risk.

Bg+

Bg

Bg-

Financial commitment towards short-term and long-term debts is bad. Business is affected by internal and external uncertain factors. There are difficulties in business operations. Solvency is uncertain and subject to high credit risk.

CCCg

Financial commitment towards short-term and long-term debts is very bad. Business is affected by internal and external uncertain factors. There are difficulties in business operations.  Poor solvency with very high credit risk.

CCg

Financial commitment towards short-term and long-term debts is extremely bad. Business operations are poor. There are very limited positive internal and external factors to support business operations and development. Extremely high credit risk is found.

Cg

Financial commitment towards short-term and long-term debts is insolvent. Business falls into a vicious circle. Very limited positive internal and external factors are found to support business operations and development in a positive cycle. Extremely high credit risk is seen and is near default.

Dg

Unable to meet financial commitments. Default is confirmed.


B.      
 Long-term Credit Rating Outlook

A rating outlook is the medium and long-term trend of credit rating of a rated entity. In formulating a rating outlook, CCXAP considers the potential change of economical and commercial factors over a medium and long-term perspective in a period of 12 to 18 months.



Positive

Indicates a rating with ascending trend

Negative

Indicates a rating with descending trend

Stable

Indicates a rating is likely to be stable

 C.        Short-Term Credit Ratings

A short-term refers to a rating for a period less than 12 months.

Rating Symbol

Definition

Ag-1

Capacity to meet short-term financial commitments is extremely strong with high level of safety.

Ag-2

Capacity to meet short-term financial commitments is strong with a high level of safety.

Ag-3

Capacity to meet short-term financial commitments is average but the safeness may be easily affected by adverse business, financial , or economic conditions.

Bg

Capacity to meet short-term financial commitments is weak with considerable probability of default.

Cg

Capacity to meet short-term financial commitments is very weak and the probability of default is very high.

Dg

Unable to meet financial commitments and default is confirmed.

 

D.       Mapping of Long-term and Short-term Credit Ratings

CCXAP’s long-term credit ratings can be mapped alongside short-term credit ratings, as follows:


Long-term Credit Ratings

Short-term Credit Ratings

AAAg

Ag-1

AAg+

Ag-1

AAg

Ag-1

AAg-

Ag-1

Ag+

Ag-1

Ag

Ag-1 or Ag-2

Ag-

Ag-1 or Ag-2

BBBg+

Ag-2

BBBg

Ag-2

BBBg-

Ag-3

BBg+

Ag-3 or Bg

BBg

Bg

BBg-

Bg

Bg+

Bg

Bg

Bg

Bg-

Bg

CCCg

Cg

CCg

Cg

Cg

Cg

Dg

Dg

 
Is the credit rating methodology of CCXAP different from its parent company and its subsidiaries in the domestic market of China? If so, will CCXAP assign a different credit rating on a Chinese rated entity which is also rated by CCXAP’s parent company or its subsidiary in the Chinese domestic market? 

Like all international credit rating agencies, CCXAP adopts credit rating principles and methodologies appealing to international investors, creditors and financial intermediaries. The rating principles are universal in nature although the rating methodologies adopted by each credit rating agency differ to a certain extent.  CCXAP’s credit rating methodologies also differ to a certain extent from its parent company and the latter’s subsidiaries in China. The differences mainly lie in the weighting of the credit factors concerned by the market participants in the international market. Therefore, credit ratings assigned by CCXAP of the same rated entities rated by its parent company and its parent’s subsidiaries may be different from the domestic credit ratings.

CCXAP carries out its credit rating analysis services independently in Hong Kong, but on a needs basis may request its parent company or its parent’s subsidiaries to help collect data in China for its analysts doing credit rating in their Hong Kong office. There is no fee-sharing arrangement in this regard.

 

How does CCXAP maintain transparency of ratings?

Transparency is a performance compliance requirement. CCXAP discloses relevant information about its rating codes, rating processes, rating principles, rating methodologies, operational policies, and rating disclosures on its website.

Why there is a need to change the credit rating of a rated entity?


CCXAP changes the credit rating of a rated entity
or a debt issue when CCXAP finds changes in the credit situation of the rated entity or a debt issue that may strengthen or weaken the rated entity’s or the debt issue’s credit worthiness. Changes in credit rating may also be made due to the annual surveillance result or any critical information obtained from the market.

How does CCXAP ensure the comparability of ratings?

CCXAP ensures the comparability of ratings among different industries and geographic regions through its rating performance research. CCXAP considers that rated entities or debt issues with the same credit rating should possess similar, but not necessarily identical creditworthiness. It also considers comparability of ratings can enhance ratings' practicality. However, at different times within different geographical regions and among different market segments, the impact of an economic cycle on a rated entity’s business operating conditions may differ. This is a major factor in causing difficulties for a credit rating agency to achieve comparability of ratings.