Characteristics of Credit Rating

Assessment on Credit Risk

A credit rating is an opinion on the credit risk of an issuer or issue, expressed through predetermined symbols. Credit risk encompasses default risk, risk that an issuer of a bond may be unable to make timely principal and interest payments, and risk of loss which represents severity of loss in the case of default.

Objective and Fair

NICE serves to facilitate issuance and distribution of securities by assessing creditworthiness of an issuer or issue in an objective and fair manner. Our credit ratings are neutral and free from bias.

Professional

creditworthiness of an issuer or issue, it is impossible to quantify all of the factors that affect creditworthiness. Therefore, credit ratings that are based on mechanical models need to be adjusted by experienced analysts or by a rating committee.
Under our professional opinion, we adopt a set of principles in credit rating so as to compare credit risks of issuers or issues under the same standard.

Credit Rating that Reflects Future Economic Cycle

Credit ratings are basically assessments of the relative future creditworthiness of entities, securities, or obligations. Rather than focusing on past performance and creditworthiness of the issuer at the time of rating assignment, we assign ratings based on rational estimates on changes in the issuer’s financial and business conditions in accordance with possible changes in business environment.
Time frame of our estimates is 3 to 5 years, enough to cover at least one economic cycle. We adopt the through-the-cycle (TTC) rating method that remains relatively constant through different business conditions than the point-in-time (PIT) rating method that is based on stock price or credit spread and is responsive to changes in current business conditions.

Credit Rating is an Opinion on Relative Risk

Credit ratings issued by NICE represent our opinions on the relative risk of an issuer or issue. The essence of credit ratings is to accurately assess relative standing of the credit risk of an issue within the major rating categories.

Complementary Role of Credit Ratings

consideration for purchase, holding, or sale, and that its credit ratings serve to merely complement each investor’s own credit analysis. Also, credit ratings do not comment on the suitability of an investment for any particular investor and are not recommendations do purchase, sell, or hold particular securities.