Credit Rating Report G.P. 2 PDF
Credit Rating Report G.P. 2 PDF
Credit Rating Report G.P. 2 PDF
Grameenphone Ltd.
[Surveillance]
Particulars Ratings Remarks
Grameenphone Ltd. AAA Entity
Telecommunication
BDT 20,570.00 million aggregate fund based limit ST-1 Please see Appendix-1 for
BDT 24,953.00 million aggregate non-fund based limit ST-1 details
Corporate
Rating outlook Stable _
ST-Short Term
Date of Rating: 30 January 2013
Validity: The entity rating is valid up to 30 December 2013 and loan ratings are valid up to limit expiry date of
respective credit facilities or 30 December 2013 whichever is earlier.
Rating based on: Unaudited Financial Statement as on 30 Sep 2012, Audited financial statement as on 31 Dec 2011,
Bank Liability position as on 31 December 2012 and other relevant quantitative as well as qualitative information up
to the date of rating declaration.
Methodology: CRAB‟s Corporate Rating Methodology (www.crab.com.bd)
PROFILE
The telecom industry of Bangladesh has been
CRAB
the Company) is a GSM based mobile industry had 97.48 million subscribers (which GP has
telecommunication service provider in the country. The 40.24 million, 41.3% of market share) in November
Company started its operation on 26 March 1997. At 2012 indicating the market is going towards maturity
the end of November 2012, GP has a subscriber base
within few years in the voice call segment; however, data
of 40.24 million ranking as the largest mobile operator
and internet service is now at growth stage. Pricing
in the telecommunication industry of Bangladesh. The
competition among the wireless operators has been
Grameenphone network has covered almost the entire
intense and pressured operating margins as the markets
population under its coverage in all 64 districts. are mostly maturing.
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Grameenphone Ltd.
In addition, average revenue per user in most markets has continued to decline, especially in emerging markets, as
subscriber growth is coming from low-segment users. However, threats from the smaller operators are expected to
subside as their profitability and cash flows are vulnerable due to their low economics of scale and limited financial
flexibility to the current economic turmoil. As a result, while we expect further erosion of operating margins, it will
be at a moderate rate and major operators are likely to keep the margins at their previous level.
GP showed around 19.0% revenue growth in 2011 amounting BDT 89,006.70 million mainly supported by the
promotional campaigns/changed package structure, subscriber growth and increase in network coverage position
during the period. This led to higher subscriber acquisition although the ARPU has come down to BDT 214 in 2011
from BDT 231 in 2010. Stable revenue is observed in 2012 (up to 30 Sep 2012, revenue was recorded BDT
69,272.90 million). Net profit after tax margin increased to 19.1% in 2011 from 14.4% in 2010 due to increase in
revenue and lower depreciation expenses. GP improved its asset utilization in 2011 as Asset turnover ratio
increased from 68.25% to 81.96% and such growth indicated efficient use of its assets to some extent. In 2011,
capital expenditure was spent mainly in base station, transmission equipment and network modernization and this
may increase in maintenance expenses in next years.
Several factors impacted GP‟s liquidity position mainly for paying of final dividend for the year 2010, interim
dividend for 2011 and the first instalment of renewal fees for 2G license and spectrum. As for mainly paying
dividends, equity decreased by BDT 8,987.34 million which led to increase in borrowed fund to equity 0.41x in
2011 compared to 0.35x in 2010. GP has maintained positive cash flow for FFO and CFO, but due to higher capital
expenditure, its FCF was observed negative in 2011. Net Financial expenses increased as borrowed fund utilization
increased in the period of Jan 2012 to Sep 2012, value BDT 2,375.16 million due to financial expenses in relation
to acquire 2G telecom license 2011. This lead to higher leverage position to some extent as borrowed fund to
EBITDA increased to 0.88x on 30 Sep 2012 from 0.33x in 2011.
BACKGROUND
Grameenphone Ltd. was the first company to introduce GSM technology in Bangladesh when it launched its services
on 26 March 1997. GP is market leader in the cellular telecommunication industry of Bangladesh with a market
share of ~41.3% (November 2012) obtained cellular license on November 28, 1996 in Bangladesh from the Ministry
of Posts and Telecommunications.
GP is a joint venture enterprise between Telenor Mobile Communication AS (55.8%), a telecommunications service
provider in Norway, and Grameen Telecom Corporation (34.2%), a non-profit sister concern of the internationally
acclaimed micro-credit pioneer Grameen Bank. The other 10% shares belong to general retail and institutional
investors.
The Grameenphone network has covered almost the entire population under its coverage in all 64 districts. The
entire GP network is EDGE/GPRS enabled that provides its subscribers access to Internet and data services from
anywhere within the coverage area.
Telenor's strong international expansion in recent years has been based on leading-edge expertise, acquired in the
Norwegian and Nordic markets, which are among the most highly developed technology markets in the world. It
has substantial international operations in mobile telephony, satellite operations and pay television services. In
addition to Norway and Bangladesh, Telenor provides wireless services, reporting close to 150 million mobile
subscribers as of 30 September 2012 operating in 11 markets and additionally is operating in 18 markets through
their ownership in VimpelCom Ltd.
As part of the conversion of Grameenphone from a private limited to a public limited company, Telenor mobile
communications as transferred 10 shares each on may 31, 2007 to its three (3) affiliate organizations namely NYE
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Telenor Mobile communications II as, Norway; Telenor Asia Pte. Ltd., Singapore; and NYE Telenor Mobile
communications III as, Norway.
Grameen Telecom
Grameen Telecom, owns 34.20% of the shares of GP, is a nonprofit company in Bangladesh, working in close
collaboration with Grameen Bank, winner of the Nobel peace prize in 2006 along with its founder, Professor
Muhammad Yunus. The internationally reputed bank for the poor has the most extensive rural banking network and
expertise in microfinance.
Grameen Telecom‟s mandate is to provide easy access to GSM cellular services in rural Bangladesh and creating
new opportunities for income generation through self-employment by providing villagers, mostly to the poor rural
women with access to modern information and communication-based technologies.
As part of the conversion of Grameenphone from a private limited to a public limited company, Grameen Telecom
transferred one share each on 31 May 2007 to its two affiliate organizations namely Grameen Kalyan and Grameen
Shakti.
Figure 1
Subscriber Base of the operators (Jan, 2011 to Jun 2012)
Business Model
Grameenphone showed consistence revenue growth since its incorporation which
is mainly driven by traffic revenue; e.g.; increasing number of subscribers during
the period. At the end of 2011, total subscriber was 36.49 million which was
raised to 40.24 million in November 2012. GP has several different dimensions:
product lines, customer segments and geographic reach, all of which enable GP to
mitigate the effects of variation in demand or pricing in a given product or market.
In assessing the level of competitive challenges, CRAB looks at, among other
things, revenue trends, number of players, rate of access line change relative to
demand growth as well as gross additions, churn levels and ARPU trends, data and
internet service etc. GP is still a dominant provider of voice and data, with a heavy
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Leadership Process
The Human Resources Division in GP is geared to meet human resource
development and training needs. In spite of its multinational characteristics, it
emphasizes more on building local expertise in the telecommunication sector.
Some of the leadership development plans include: training, coaching, new
tasks/project work, job rotation, and others. GP has agreements with the
Stockholm School of Economics in Sweden, the Singapore Institute of
Management, the Hyderabad-based Indian School of Business and the British
Council for providing “Management Development” training to GP employees. In
addition, GP provides educational grants every year to 100 employees
encouraging employees to go for higher education. For the current and upcoming
leaders of GP, “Telenor CORE Leadership Training” is offered every year. This
program is designed to help leaders fulfill GP leadership expectations by
increasing skills in practical leadership and their motivation to lead.
Strategic Planning
The effective and efficient management and defined strategy are the ingredients
for GP‟s present strong position in the market. Strategic Planning process is based
on at least next three years scenario analysis. Based on the midterm plan, it also
chalks out annual plan at the beginning of each year. Strategic planning is used
regularly to develop goals and objectives for improving quality. The organization
has established a complete strategic plan for addressing quality improvement,
including mission, vision, goals, specific tasks, targets and programs. All levels of
the company participate in some form of strategic planning.
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viable for all parts of the Company. Operating plans are developed throughout the
entire company, linked to the company's overall strategy. Managers are held
accountable for meeting strategic goals.
The organization measures data through its MIS system related to customers,
products, supplier performance, financial performance, and employee
performance. GP tracks Market and Statistical Information and it analyses monthly
operator wise subscriber base and its market share position, market growth trend,
operator wise net adds, market share net adds, penetration rate, annualized
churn, gross add mixing, churn mixing, subscriber mixing, Minutes of usage,
AMPU, APPM services, APPM Airtime, SMS positions, SMS per subscriber etc. GP
uses external benchmarks and competitive data to drive improvements, operating
performances and planning. Competitive data is also found very extensive.
Through its Business Intelligence Team it collects key cost, financial, operating,
and other data and translating it into useful information for employees and
decision makers, which supports both operating and long-term planning
decisions.
Process Management
Processes are well documented and controlled throughout the entire company.
Practices are in place to consistently evaluate and improve processes. Critical
processes are subject to rigid assessments on a regular basis. Analytical
techniques are in place to identify and solve process management issues.
Partnerships with suppliers and other stakeholders have been established to better
manage processes for the benefit of all players.
New products are launched through market survey and competitors move. To
retain and grow its market share GP as its policy evaluate and tries to shorten
design processes for new products and services.
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Production and Delivery Processes: The organization has control over processes,
including control over variations and defects in processes that are used for
producing and delivering products and services. The organization uses systematic
and standard approach to evaluate processes for better quality, defects, and other
operating performance attributes.
Business and Support Service Processes: The organization manages quality control
relates to routine business processes and support services such as human
resources, finance, legal, payroll, public relations through pre defined goals and
goal achievement indicators as well as variance analysis.
Supplier Quality: GP maintains its code of conduct for all of its stakeholders. It
communicates quality standards and requirements to its suppliers and it has a
quality assurance process to ensure that suppliers are meeting quality
requirements. The Management Team evaluated the quality requirements of the
suppliers. The procurement policies are approved by the Board and the Board
delegates financial and investment authority to the management based on its
position. The organization has a cooperative relationship with its suppliers,
including reward programs, certification and other policies, which in turn assist to
build long-term relationships.
Quality Assurance: The organization has internal audit department, which reports
to the Board through CEO. The internal audit function encompasses on financial
auditing and control. Besides, product and services audit including systems and
processes are also under the purview of internal audit function. It is evident that
organization practices regular follow up with assessments and effectively corrects
the problem or resolves the issues that were identified. The process is also
documented.
Operating Results
Customer satisfaction and other measurements clearly show high levels of
customer satisfaction and loyalty. Overall trends are positive when it comes to
improving processes throughout the entire company, including processes that cut
across business functions and stakeholder groups. Any negative trend is acted
upon with a plan for turning the trend around. Supplier data also shows positive
trends in making improvements within the supply chain. Support services have
shown solid results in making processes very efficient and effective.
Franchise Value
Franchise Value is a critical element in our analysis. The solidity of GP‟s market
standing in telecom industry indicates its very high franchise value. The solid and
defensive franchise of GP underpins the ability of the institute to generate and
sustain recurring earnings, to create economic value and, thus, to preserve and
improve risk protection in its chosen market. As such, GP with strong franchise
value would be in a better position to withstand prolonged difficult market
conditions.
The Bangladesh telecom industry with its untapped growth potential in the rural
segment is currently facing challenges with respect to falling ARPUs and MoUs on
account of high competition, uncertainty on regulatory framework and absence of
3G services in private telecom companies (except Teletalk).
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The licenses of the four telecom operators, Grameenphone Ltd., Orascom Telecom
Bangladesh Ltd., Axiata Bangladesh Ltd. (ROBI), and Citycell are renewed on 7 Aug
2012. However, the licenses were supposed to be renewed in November last year
but the process was delayed due to a number of court battles between the telecom
regulator, carriers and the tax administrator. The largest carrier, Grameenphone
will pay BDT 32,410 million for its 14.6 Megahertz spectrum, Banglalink BDT
19,710 million for 12.4 Mhz, Robi BDT 19,000 million for 12.8 Mhz, and Citycell
will have to pay BDT 4,500 million for 10 Mhz excluding VAT. They will pay BDT
100 million each as license renewal fee. The carriers have already paid 49 percent
of their license renewal charges to the government, and will pay 29 percent of the
amount on August 31, and the rest at the yearend. The carriers now share 5.5
percent revenue with the government and 1 percent more for a social obligation
fund (SOF), meant for the development of the information and communication
technology sector. The 3G license guideline has not yet been finalized by BTRC,
which is also likely to cost a lot as it has been the case of WIMAX operators in
Bangladesh and 3G licensees in our neighboring country – India. As a result CRAB
perceives the regulatory risk of the telecom industry to be high which would affect
the creditworthiness of the players through debt led CAPEX. Nevertheless,
economic globalization and rapid technological advances are providing regulators
with an opportunity to review previous telecommunications mandates.
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asset life cycles, especially for technical equipment and software. Similar to their
wire line brethren, wireless operators are facing a tremendous bandwidth surge,
as data and video applications migrate onto wireless networks. Capital
deployments in the wireless sector will generally be directed toward acquiring new
licenses and enhancing coverage and maintain Quality of Service. However, current
infrastructure sharing between the operators will lessen the CAPEX burden to
some extent in the next years.
In the long run it can be expected that merger and acquisition activity in the
telecommunications sector could trigger due to: The benefits of scale and
expansion into new markets (either geographically or product wise) will prompt
more companies to supplement internal growth and development with
acquisitions. The high fixed-cost nature of the industry offers tremendous
synergy opportunities for acquirers, while industry consolidation still has ample
capacity following a decade-long investment cycle and emergence of new
competitors. While M&A activity can lead to revenue diversity and improved
margins, debt-financed acquisition activity is a key credit risk that is likely to put
pressure on ratings.
In January 2010, Bharti Airtel Limited, Asia‟s leading integrated telecom services
provider, acquired 70% stake in Warid Telecom, Bangladesh, a subsidiary of the
UAE-based Abu Dhabi Group. While M&A activity can lead to revenue diversity and
improved margins, debt-financed acquisition activity is a key credit risk that is
likely to put pressure on future ratings.
Market Growth
The telephone market of Bangladesh is likely to remain highly profitable. Both wire
line and wireless market are growing and the growth is likely to continue at a
consistent rate for next few years. Industry growth rates, which are increasing,
evidence a sector, which is likely overall to qualify as investment grade when
considering this characteristic in isolation. Unlike the wireless segment, the
growth of wire line segment would not accelerate; however, it is expected that the
growth rate of wire line segment would be flat for next few years then it will be
declining.
The graph below depicts the total subscribers in million along with penetration
rate from 2002 to 2012 (up to July) where the Bangladeshi telecom market shows
tremendous potential for growth. Year-to-Year growth rate of subscribers from
2007 to 2011 stands at 65%, 54%, 20%, 31% and 24%, a declining growth rate
indicates to reach a maturity market in next few years.
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Figure 2
Mobile market growth
CRAB views that growth rates are sustainable. While assessing sustainability of the
growth, assessment includes consideration on market demographics. Lower
cellular penetration rate is also a good indicator of likely good medium-term
growth prospects. Likewise, this situation represents a sound indicator that fixed
line operators are likely to experience significant medium term revenue pressure
as product substitution remains at an early stage.
Market Share
GP has been the market leader at a stretch for more than a decade. The mobile
telecommunication industry had 97.48 million subscribers in November 2012 of
which GP has 40.24 million (41.3%), Banglalink has 26.21 million subscriber
(26.9%) and ROBI‟s subscriber base stood at 21.12 million (21.7%). Other 10%
market share is held three operators Airtel (6.94 million), Citycell (1.60 million)
and Teletalk (1.37 million). Total addition from December 2011 to July 2012 is
around 9.26 million subscribers which indicate a rising trend in mobile
penetration. The relative position of GP among the operators is indicative of the
likely sustainability of its operating position and ability to exercise control over
the nature and pace of development. The present subscriber base and leading
position of GP in the market indicates that the customers perceived GP well and
shows its ability to develop/support revenue, and bring innovation in products
and services development.
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Table-1
Shareholding Position of GP as of 31 December 2011
Name of Shareholders Number of % of total
Shares held shareholding
Telenor Mobile Communications AS, Norway 753,407,724 55.80
Nye Telenor Mobile Communications II AS, 215 0.000016
Norway
Nye Telenor Mobile Communications III AS, 215 0.000016
Norway
Telenor Asia Pte Ltd., Singapore 215 0.000016
Grameen Telecom, Bangladesh 461,766,409 34.20
Grameen Kalyan, Bangladesh 22 0.000002
Grameen Shakti 22 0.000002
General Public, GP employees & institutions 135,125,200 10.00
Total 1,350,300,022 100.00
In addition to the other legal guidelines, the Grameenphone Board has also
adopted “Governance Guidelines for the Board” for ensuring better governance in
the work and the administration of the Board. The Board of Directors in
Grameenphone is comprised of nine members including the Chairman who is
elected from amongst the members. In compliance with the Corporate Governance
Guidelines issued by the Securities and Exchange Commission (SEC) and as per the
provision of the Articles of Association (AoA) of the Company. The AoA requires
the Board to meet at least four times a year and otherwise when duly called for in
writing by a Board member or Shareholder. Dates for Board Meetings in the
ensuing year are decided in advance and the notice of each Board Meeting is
served in writing.
Audit Committee
The Grameenphone Audit Committee was established in late 2008 as a sub-
committee of the Board and has jurisdiction over Grameenphone and its
subsidiaries. The audit committee is comprised of three members of the Board
including an independent Director. The Chief Executive Officer, the Chief Financial
Officer, the Company Secretary and the Head of Internal Audit are permanent
invitees to the Audit Committee meetings.
The Audit Committee assists the Board in fulfilling its oversight responsibilities
with respect to internal control, financial reporting, risk management, auditing
matters and GP‟s processes of monitoring compliance with applicable legal and
regulatory requirements and the Code of Conduct. The Audit Committee Charter
as approved by the Board defines the purpose, authority, composition, meetings,
duties and responsibilities of the Audit Committee.
Treasury Committee
This committee consists of two representatives from shareholders and the CFO of
GP. All significant financial matters which concern the Board are discussed in this
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committee in detail. The issues are ultimately forwarded to the Board for their
final review and approval.
Global telecommunication industry has evolved significantly over the last decade;
spur on by regulatory liberalization, technological advancements and the
availability of capital. We expect that rapid technological changes will continue to
pressure the capital budgets of GP, which means increased risk of asset
impairment or obsolescence. The cost of adopting new technology is significant,
both in terms of capital required and the risk of failures, which constitutes a key
ratings consideration. Alternatively, the analyst observed that there might be a
business cost for failing to quickly adopt new technology before competition
erodes the incumbent‟s position. So the important features are the duration of
development and introduction cycles for major technologies, which is assessed for
its likely impact on product competitiveness.
GP improved its asset utilization in 2011 as Asset turnover ratio increased from
68.25% to 81.96% and such growth indicated efficient use of assets compared to
its peers.
CRAB assesses the Company‟s technological risk starts with an evaluation of the
lifetime service capabilities and scalability of the Company‟s existing network
architecture. Because the telecom industry is very capital intensive and faces rapid
technological innovation, the investment strategy is critical to its future prospects,
which is found commensurate in line with present market dynamics. Capital
expenditure as percentages of its revenue indicated that GP had spent more for on
its capital expenditure in 2011 as compared to its previous year. Capital
expenditure was BDT 63,080.93 million in 2011 which was BDT 17,909.32 million
in 2010. Last year in 2011, capital expenditure was spent mainly in base station,
transmission equipment and network modernization. However, GP being ahead of
network coverage as market leader has almost reached optimum level of CAPEX
involvement for last few years.
Several factors impacted GP‟s liquidity position mainly for paying of final dividend
for the year 2010, interim dividend for 2011 and the first instalment of renewal
fees for 2G license and spectrum. Moreover, as on 30 Sep 2012, GP paid BDT
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8,058.54 million as payment for renewal of 2G licence and other intangible assets.
Since the inception of GP, increasing revenue growth is observed till 2011
(revenue amount BDT 89,006.70 million) which is supported by its planned and
comprehensive CAPEX. The revenue was also supported by the changed package
structure, which led to higher subscriber acquisition although the ARPU has come
down to BDT 214 in 2011 from BDT 231 in 2010. After that, stable revenue is
observed in 2012 (up to 30 Sep 2012, revenue was recorded BDT 69,272.90
million). Mainly, Traffic revenue from Subscription growth ~21.63% in 2011 (36.49
million at the end of 2011) resulted 19.1% revenue growth in 2011 from 2010.
Revenue growth in prepaid, post paid and Internet and data were 18.61% , 2.69%
and 30.04% respectively in 2011 compared to the previous year. Net profit after
tax margin increased to 19.1% in 2011 from 14.4% in 2010 due to increase in
revenue and lower depreciation expenses compared to the previous year.
However, higher income taxes and losses on foreign exchange (BDT 651.42
million) during 2011 partially offset that net profit but GP could manage efficiently
its operating expenses which was remain same in 2011. Depreciation expenses
will be higher in next year/s because of Capex in 2011 which will put effect to
profit margin to some extent.
As perceived by CRAB from the financial indicators of GP, historically the Company
had a steady and sustaining business growth compared to other players in the
industry. Although GP‟s market share has been taken up by other operators due to
tariff sensitive customer base, still GP dominates the market share with premium
price packages.
Borrowed fund decreased by BDT 885.89 million in 2011 and decreased in equity
by BDT 8,987.34 million for paying final dividend of 2010 and interim dividend of
2011. For this, increased in borrowed fund to equity observed 0.41x in 2011
which was 0.35x in 2010. GP has maintained positive cash flow for FFO and CFO,
but due to higher capital expenditure, its FCF was observed negative in 2011. Net
Financial expenses increased as borrowed fund utilization increased in the period
of Jan 2012 to Sep 2012, value BDT 2,375.16 million due to interest charged in
relation to the periodic unwinding of liability to acquire 2G telecom license 2011.
This lead to higher leverage position to some extent as Borrowed fund to EBITDA
increased to 0.88x on 30 Sep 2012 from 0.33x in 2011.
Grameenphone Ltd. has banking relationship with Standard Chartered Bank, HSBC,
Commercial Bank of Ceylon, Citibank NA, Eastern Bank Limited, Pubali Bank Ltd.,
Woori Bank, Southeast Bank Ltd., The City Bank Ltd., Trust Bank Ltd., Mutual Trust
Bank Ltd., UCBL, Premier Bank Ltd., BRAC Bank Ltd., IFIC Bank, Bank Alfalah, Dhaka
Bank, Mercantile Bank. Besides, The Company has non funded credit facilities with
CBCL, Prime Bank, Jamuna Bank, One Bank, DBBL, Shahjalal Islami Bank Ltd. The
details of credit facilities are provided in the Appendix-1.
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Note: Outstanding as on 31 December 2012 and these information are provided by the management of
Grameenphone Ltd.
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A1 , A2 , A3 Companies rated in this category have strong capacity to meet financial commitments, but are susceptible to the adverse effects of changes in
Single A circumstances and economic conditions. These companies are judged to be of high quality, subject to low credit risk.
BBB1, BBB2, BBB3 Companies rated in this category have adequate capacity to meet financial commitments but more susceptible to adverse economic conditions or
Triple B changing circumstances. These companies are subject to moderate credit risk. Such companies possess certain speculative characteristics.
BB1, BB2, BB3 Companies rated in this category have inadequate capacity to meet financial commitments. Have major ongoing uncertainties and exposure to
Double B adverse business, financial, or economic conditions. These companies have speculative elements, subject to substantial credit risk.
B1, B2, B3 Companies rated in this category have weak capacity to meet financial commitments. These companies have speculative elements, subject to high
Single B credit risk.
CCC1, CCC2, CCC3 Companies rated in this category have very weak capacity to meet financial obligations. These companies have very weak standing and are subject
Triple C to very high credit risk.
CC Companies rated in this category have extremely weak capacity to meet financial obligations. These companies are highly speculative and are likely
Double C in, or very near, default, with some prospect of recovery of principal and interest.
Companies rated in this category are highly vulnerable to non-payment, have payment arrearages allowed by the terms of the documents, or
C
subject of bankruptcy petition, but have not experienced a payment default. Payments may have been suspended in accordance with the
Single C
instrument's terms. These companies are typically in default, with little prospect for recovery of principal or interest.
D
D rating will also be used upon the filing of a bankruptcy petition or similar action if payments on an obligation are jeopardized.
(Default)
*Note: CRAB appends numerical modifiers 1, 2, and 3 to each generic rating classification from AA through CCC. The modifier 1 indicates that the obligation ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
DEFINITION
ST-1
This rating indicates that the degree of safety regarding timely payment on the loans/facilities is very strong.
Highest Grade
ST-2 This rating indicates that the degree of safety regarding timely payment on the loans/facilities is strong; however, the relative degree of safety is lower
High Grade than that for issues rated higher.
ST-3 This rating indicates that the degree of safety regarding timely payment on the loans/facilities is adequate; however, the issues are more vulnerable to
Adequate Grade the adverse effects of changing circumstances than issues rated in the two higher categories.
ST-4 This rating indicates that the degree of safety regarding timely payment on the loans/facilities is marginal; and the issues are quite vulnerable to the
Marginal adverse effects of changing circumstances.
ST-5 This rating indicates that the degree of safety regarding timely payment on the loans/facilities is minimal, and it is likely to be adversely affected by
Inadequate Grade short-term adversity or less favorable conditions.
ST-6
This rating indicates that the loans/facilities are expected to be in default on maturity or is in default.
Lowest Grade
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IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY CRAB IN ANY FORM OR
MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its
own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling.
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CRAB I CRAB Ratings on Corporate Credit Digest I 30 January 2013