6.1 Rating Procedure
Brickwork Ratings website provides all the general information related to Ratings policy, process, criteria, scales & the list of rated companies including rating rationale and it is available on our web page link at http://brickworkratings.com/ratingservices.html
6.2 Credit Rating History and Defaults
6.2.1 Details of new credit ratings assigned during April to September 2010
Annexure I
6.2.2 Movement of credit rating of all outstanding securities during April to September 2010:
(a) Movement of each credit rating
Annexure II
(b) Movement of each credit rating from investment grade to non‐investment grade and vice versa
Annexure III
(c) Movement of each credit rating that has moved by more than one notch
Annexure IV
6.2.3 The history of credit rating of all outstanding securities for the period ending September 2010
Annexure V
6.2.4 On annual basis, the list of defaults separately for each rating category
(e.g. AAA, AA, A, BBB, BB, B, C).This shall include the initial credit rating assigned by the CRA, month and year of initial rating, month and year of default, last credit rating assigned by the CRA before the issuer defaulted, comments of CRAs, if any.
Annexure VI
6.2.5 On annual basis, the average one‐year and three‐year cumulative default rates (based on weighted average), for the last 5 years, separately for each following category.
(i) Each credit rating category (e.g. AAA, AA, A, BBB, BB, B, C), separately
Annexure VII
(ii) Structured instruments and non‐structured instruments, separately
Annexure VII
Brickwork Ratings was incorporated in 2007 & registered by SEBI in February 2008. In view of limited period of operations, Brickwork Ratings has a nil default record. Brickwork has hence prepared an annual performance review for the ratings undertaken. The Ratings Review for the period January 2009 to December 31, 2009 could be accessed below.
Ratings Review‐ Jan‐Dec 2009
6.3 Income
6.3.1 A CRA shall disclose the general nature of its compensation arrangements with the issuers.
Prior to taking up the rating assignment, we receive a rating mandate from the issuer in a standard format which includes the fee structure for both initial rating fees and surveillance fees. The rating fee structure will vary depending whether the instrument is long‐term instrument or a short‐term instrument or whether it is a public sector or a private sector and also this would vary according to the size of the issue. The rating fee may also vary depending upon the competitive environment. As a policy, the rating fee is never linked to the final issuer rating.
6.3.2 A CRA shall disclose, in case of accepted ratings, its conflict of interest, if any, including the details of relationship - commercial or otherwise – between the issuer whose securities are being rated / any of its associate of such issuer and the CRA or its subsidiaries.
The conflict of interest may arise on account of the following:
1) Rating the promoter entity
2)
Carry an advisory assignment to a client with whom we have rating relationship.
3)
The rating committee member is an interested party for the issuer
Brickwork has rated India Infrastructure Finance Company Ltd (IIFCL) bonds – Rs 2000 crore issue as AAA (SO), since the bonds have been guaranteed by the Government of India. Shri N Balasubramanian is the common director in both Brickwork Ratings as well as IIFCL. The issue of conflict of interest was brought to the notice of the company and rating was completed based on legal opinion obtained by IIFCL. Appropriate disclosure of the same was also made in the rating rationales that were published on the website. Shri Balasubramanian, however, is not a member of the rating committee and does not participate in any rating committee proceedings.
6.3.3.1
Brickwork shall disclose total receipts from rating services and non rating services on an annual basis
6.3.3.2 The issuer wise percentage share of non‐rating income of the CRA and its subsidiary to the total revenue of the CRA and its subsidiary from that issuer
NIL
6.3.3.3 Names of the rated issuers who along with their associates contribute 10% or more of total revenue of the CRA and its subsidiaries.
NIL
6.4 Structured Finance Products
6.4.1 While publishing the ratings of structured finance products and their movements, a CRA apart from following all the applicable requirements in case of non‐structured ratings shall also disclose the track record of the originator and details of nature of underlying assets while assigning the credit rating. The track record shall include a brief description of the financials of the originator, rating migrations to speculative categories and defaults.
Our rating rationales carry all the information as required under this provision.
6.4.2 A CRA shall also disclose at least once in every six months, the performance of the rated pool, i.e., collection efficiency, delinquencies. A CRA shall also provide a detailed description of the underlying pools including ageing, Credit enhancements such as liquidity supports, first and second loss guarantee provided shall also be disclosed.
We have not rated a single pool for the period ending September 2010.
6.5 Unsolicited Credit Ratings
6.5.1 While publishing unsolicited ratings and their movements, a CRA apart from following all the applicable requirements in case of solicited ratings shall make the following disclosures:
a. The extent of participation by the issuer, its management, bankers and auditors in the credit rating process.
b.
The information used and its source in arriving at and reviewing the credit rating.
The major distinction between an unsolicited and a solicited rating is that the latter is requested and therefore paid for by the rated firm while the former is neither of the two. Consequently, unsolicited ratings are based on publicly available information only and also based on the internal research on industry and peer group.
The credit rating symbol for an unsolicited rating is accompanied by the word UNSOLICITED in bold letters to differentiate from the solicited ratings.
6.5.2 A CRA shall disclose annually
(i) All the unsolicited ratings carried out in the last three financial years
(ii) Names of issuers, out of those mentioned in (i) above, which were given solicited rating in the last financial year
Annexure VIII
6.6 Shareholding Pattern of Brickwork Ratings as prescribed by stock exchanges for a listed company under clause 35 of Listing Agreement.
Annexure IX
6.7 Compliance Status of IOSCO Code of Conduct ‐ A CRA shall disclose the compliance status of each provision of IOSCO code of conduct.
Brickwork Ratings’ code of conduct follows IOSCO code of conduct in spirit of provisions. The following Annexure X shows how BWR code compares with the IOSCO code, in respect of each provision.
Annexure X
