Fitch Ratings can be considered as the U.S. credit rating corporation, specializing in the independent loan underwriting for global markets. The headquarters are situated in London and New York. It is included in the Big Three List of the largest rating agencies. Data, collected by the group, serves as a target for predicting the capital bankruptcy, and bringing subsequently a certain return.
Essence of Fitch Ratings
Being the third major agency, along with Moody’s and S&P, corporations cover more than 95% of market share, leaving other companies far behind. Anyway, Fitch Ratings is notorious for estimating the national and international enterprises that are officially referred to as Issuer Default Ratings (IDR).
The agency applies the alphabetic notation from “AAA” to “D”. So the whole Fitch Ratings system is presented below.
Investment grade ratings are:
- “AAA” possesses the highest level of financial standing and the lowest expectations for default risks. Assigning happens only in case of exceptionally strong capacity to repay liabilities on schedule.
- “AA” means higher credit-worthiness with lower credit risk expectations. The obligations must also be rendered on time.
- "A" entails a low risk of default. Economic forces or corporate factors are able to influence an enterprise's well-being.
- "BBB" contemplates credibility at a decent level, quite low default expectations, and appropriate aptitude to repay liabilities. The referred investment grade is the lowest among others, as stability of the company also depends on economic sentiment.
Speculative grade ratings are:
- "BB" indicates that there is room for default, especially as a result of adverse economic development. However, alternative resources may be available for meeting enterprise’s financial obligations.
- "B" demonstrates significant default expectations with a limited rainy day fund. Financial obligations are met, however, continuing payments is conditional.
- "CCC" means that securities obligations are met, but the chances of real default are strong.
- "CC" shows that default appears probable.
- "C" is about default being inevitable.
- "RD" indicates that the issuer has failed to make timely payments.
- "D" is assigned to an issuer or a state that has defaulted on all its financial obligations.
National and International Fitch Ratings
The Fitch national rating is set the same way, but the format is the following "AAA(xxx)", "AA(xxx)", "A(xxx)", etc. The suffix indicates the assigned country. Anyway, the situation, when the enterprise rating is higher than the state's one, is impossible, as the most reliable market borrower is the country itself.
Fitch has an additional gradation for national ratings - an “E(xxx)”. It specifies the absence of needed information for assignment. So, if the issuer was previously suspended due to the lack of documentation, then this rating is used.
Both international and national ratings may be supplemented with a note “under control”, as well as the so-called forecast, that can be reviewed within a year or two years period. The Fitch rating outlook can be positive, stable or negative. A plus (+) or minus (-) sign indicates an intermediate grade.
So, investors are able to review the Fitch Ratings, in order to realize the risk level of investing in a certain country. The best possible sovereign credit rating should be obtained to receive the access of finance provision on the international bond markets.