The rating process is divided in different phases starting with the choice of agency by the issuer. After understanding the agency's philosophy including methodology by the issuer, the workload will be evaluated by the analysts and all necessary documents need to be provided.
Within the agency the dedicated rating team will be announced right after mandating, before the quantitative phase will start.
Management interviews will be carried out right after the quantitative phase has been finished in order to understand the individual business, the market and the underlying risks. The management interviews are an important base for the qualitative analysis. With its finalisation, the rating committee will be able to announce a final decision, which then will be communicated to the issuer and press.
To determine project rateability Scope requires a project timeline and a term sheet including the key information on collateral, issuer and structure.
To start the analysis deliver preliminary feedbacks also Term sheet, all available documentation drafts and detailed financial data of the underlying collateral are needed.
To prepare a rating committee and assign a final rating, we will ask for a final full set of contracts, Black offering circular and all legal and tax opinions covering the relevant contracts.
Scope's methodology guidelines lay down the key principals that Scope applies for rating and monitoring all types of structured finance instruments and present how key criteria are integrated in the rating process. When rating instruments of a particular asset class, Scope may supplement these guidelines with asset-specific assumptions disclosed in additional documents. Structured finance instruments designate debt securities or contracts associated with a transaction or scheme in which the credit risk associated with an exposure or a pool of exposures (underlying collateral or collateral) is generally subject to tranching. Payments/Losses related to the rated instrument depend primarily on the performance of the collateral and the seniority of the instrument within the transaction.
Scope's rating methodology guidelines rely on three analytical building blocks:
- a specific assessment of the underlying collateral,
- risks related to key parties to the transactions
- analysis of the transaction´s specific structure
Scope believes that the analysis of qualitative factors plays a crucial role in assigning a rating. Scope´s methodology therefore puts an emphasis on qualitative credit judgments based on objective components. Scope relies in particular on its framework for rating asset management quality developed for German open and closed-end funds, as well a stress testing and breakeven analysis to supplement its quantitative approach.