During the surveillance period of an assigned rating, sudden events or developments may occur involving changes in the business, management, industry, or financial profile of the entity. The impact of such developments on the entity’s rating may be difficult to assess immediately; hence, the rating requires being placed under “Rating Watch”.
Such circumstances are generally short-term in nature. Typical triggering events include, but are not limited to:
- Event-driven uncertainty with potential rating impact, such as change in shareholding pattern of the issuing company, which can influence the overall control of the company, its management, and the way it operates.
- Corporate restructuring such as demergers, division spinoffs, buyouts and takeovers, which could impact the operations of the company, its profitability, market share,
- Change in business strategy of the issuing company that could impact profitability and
- Financial or operational stress indicators that require further confirmation.
- Significant regulatory or legal developments, such as adverse court orders, major regulatory penalties, or license suspension / restrictions, etc.
Upon the occurrence of any of the above triggering events, a note shall be placed before the appropriate Rating Committee to place the rating under "Rating Watch", if warranted.
Resolution of Rating Watch
Ratings placed on "Rating Watch" are continuously monitored to assess the impact of triggering developments. Once the necessary information is gathered and evaluated, a review note is presented to the Rating Committee, which may decide to either retain the rating on “Rating Watch”, or remove it and assign an updated rating. Placing a rating on “Rating Watch” indicates potential movement but does not automatically guarantee an imminent rating change. The resolution or review of ratings under “Rating Watch” is generally expected to take place within 6 months; once a reasonable assessment is feasible (typically within this 6-month period), the matter is brought before the Rating Committee for formal resolution.
To indicate the likely direction of any potential rating action while under surveillance, ratings are assigned one of the following standard descriptors:
Standard Descriptors
| Rating Watch |
Implication |
| Rating Watch with Positive Implications |
Certain events are likely to have a positive impact on the credit rating of the entity. |
| Rating Watch with Developing Implications |
Certain events are likely to have a significant impact on the credit rating of the entity. However, the nature of the impact is uncertain at the current point in time. |
| Rating Watch with Negative Implications |
Certain events are likely to have a negative impact on the credit rating of the entity. |