Fitch Group (Constellation rating firm)

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Not to be confused with the financial printing and date company headquartered in New York City and also known as the Fitch Group.^[1].

The Fitch Group (technically, Fitch, Inc.)^[1] is a financial corporation whose divisions include Fitch Solutions, an advisory firm offering products and services to the financial industry, established in January 2008 partly following the criticism on Rating Agencies; Algorithmics Inc., the risk management software vendor and research firm; and Fitch Ratings, Ltd. Fitch Ratings is an international credit rating agency dual-headquartered in New York City and London. It was one of the three Nationally Recognized Statistical Rating Organizations (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975, together with Moody's and Standard & Poor's.

The firm was founded by John Knowles Fitch on December 24, 1913 in New York City as the Fitch Publishing Company. It merged with London-based IBCA Limited in December 1997, and is majority-owned by Fimalac (From Wikipedia.fr: Fimalac), a French holding company. In 2000 Fitch acquired both Chicago, Illinois-based Duff & Phelps Credit Rating Co. (April) and Thomson BankWatch (December). Fitch is the smallest of the "big three" NRSROs, covering a smaller share of the market than S&P and Moody's, though it has grown with acquisitions and frequently positions itself as a "tie-breaker" when those other two agencies have ratings similar, but not equal, in scale.

Stephen W. Joynt is Chief Executive Officer of the Fitch Group. Joynt also serves as Chief Executive Officer of Algorithmics, Inc. and as President and Chief Executive Officer of Fitch Ratings.

Content 1 Long-term credit ratings 2 Short-term credit ratings 3 Criticism 4 Fitch Solutions 5 References 6 External links

Long-term credit ratings

Fitch Rating' long-term credit ratings are set up along a scale from 'AAA' to 'D', first introduced in 1924 and later adopted and licensed by S&P. Moody's also uses a similar scale, but names the categories differently. Like S&P, Fitch also uses intermediate modifiers for each category between AA and CCC (i.e., AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB- etc.).

Investment grade

• AAA : the best quality companies, reliable and stable
• AA : quality companies, a bit higher risk than AAA
• A : economic situation can affect finance
• BBB : medium class companies, which are satisfactory at the moment

Non-investment grade (also known as junk bonds)

• BB : more prone to changes in the economy
• B : financial situation varies noticeably
• CCC : currently vulnerable and dependent on favorable economic conditions to meet its commitments
• CC : highly vulnerable, very speculative bonds
• C : highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to pay out on obligations
• D : has defaulted on obligations and Fitch believes that it will generally default on most or all obligations
• NR : not publicly rated

Short-term credit ratings

Fitch's short-term ratings indicate the potential level of default within a 12-month period.

• F1+ : best quality grade, indicating exceptionally strong capacity of obligor to meet its financial commitment
• F1 : best quality grade, indicating strong capacity of obligor to meet its financial commitment
• F2 : good quality grade with satisfactory capacity of obligor to meet its financial commitment
• F3 : fair quality grade with adequate capacity of obligor to meet its financial commitment but near term adverse conditions could impact the obligor's commitments
• B : of speculative nature and obligor has minimal capacity to meet its commitment and vulnerability to short term adverse changes in financial and economic conditions
• C : possibility of default is high and the financial commitment of the obligor are dependent upon sustained, favourable business and economic conditions
• D : the obligor is in default as it has failed on its financial commitments.

Criticism

See also: Credit rating agency#Criticism

Credit rating agencies such as Fitch Ratings have been subject to criticism in the wake of large losses in the collateralized debt obligation (CDO) market that occurred despite being assigned top ratings by the CRAs. For instance, losses on $340.7 million worth of collateralized debt obligations (CDO) issued by Credit Suisse Group added up to about $125 million, despite being rated AAA by Fitch.^[2] However, differently from the other agencies, Fitch has been warning the market on the constant proportion debt obligations (CPDO) with an early and pre-crisis report highlighting the dangers of CPDO's.^[3]

Fitch Solutions

In 2008, in order to capitalize on products and services and enhance independence of the rating agency, a new division of the Fitch group was created, Fitch Solutions. Fitch Solutions hosts non-rating products and services, product developments and sales, and training services. The division activity includes deals valuation (as opposed to rating), data, research and both in-house and external training.

References

1. ^ ^{a b} "Timeline of Fitch Group". fitchratings.com. http://www.fitchratings.com/web_content/marcom/group_timeline.cfm.
2. ^ Tomlinson, Richard; Evans, David (2007-06-01), "CDOs mask huge subprime losses, abetted by credit rating agencies", International Herald Tribune, http://www.iht.com/articles/2007/05/31/bloomberg/bxinvest.php
3. ^ Linden, Alexandre; Neugebauer, Matthias; Schiavetta, John; Zelter, Jill; Hardee, Rachel (2007-04-18), First Generation CPDO: Case Study on Performance and Ratings, http://www.defaultrisk.com/pp_crdrv141.htm

External links

• Fitch Ratings
• Credit Raters Exert International Influence (washingtonpost.com)
• U.S. Credit: Fitch Ratings

Fitch Ratings' CDO (Collateralized Debt Obligation) Group covers a wide variety of increasingly complex transactions that are backed by various assets from Corporate, CMBS, ABS and other sectors. The CDO group is composed of individuals with diverse backgrounds from both corporate and asset-backed disciplines. As a result, Fitch brings a unified approach to the analysis and ratings of cash flow, synthetic and market value CDOs that leverages a thorough understanding of the structural aspects of securitization and an awareness of the various underlying assets and associated risks. The methodology also evaluates CDO asset managers based on defined quantitative measures as well as qualitative attributes.

Coverage
Fitch Ratings' CDO Group analyzes multiple asset classes including:
> ABS
> Alternative Investments (Hedge Funds, Private Equity Funds)
> Bank Loans
> CMBS
> Distressed Assets
> Emerging Market Debt
> High Yield Loans
> Mezzanine Debt
> Middle Market Loans
> Project Finance Loans
> REIT Debt
> RMBS
> Trust Preferred Securities