RSU-Rating

For assessing all types of institutions worldwide engaged in banking-like transactions and subject to supervision – from one-stop finance players and all types of banks (universal, investment, mortgage, cooperative, quasi-state or supranational) to bank holding companies, building societies, and even businesses without a banking license.

Based on a scorecard- approach. The LB Rating tool combines quantitative and qualitative parameters with a rating of the relevant banking system and several market factors. Countries are grouped; for institutions located in other countries, transfer risks are taken into account. Last but not least, the tool considers organizations’ shareholder structures, eleven institutional protection schemes in Europe, and any government support received.

For assessing businesses in a variety of industries worldwide. The tool defines country segments taking into account the different legal and business conditions in individual countries and, for organizations in other countries, also covers transfer risks.

The rating system combines quantitative and qualitative parameters, appropriately weighted. For publicly listed companies, it also includes an option price theory-based mathematical model. In addition, analysts can enter warning signals and any relevant outside influence.

Covering default probabilities, LGD, and expected loss for the financing of aircraft – from single planes to entire fleets. The module is able to incorporate all common forms of financing – such as direct loans to airlines, finance leases, operating leases, and warehouse facilities – and displays the results in aggregated form.

Loss values are determined by tranche, taking into account both the collateral provided and the ranking of claims. This method permits calculations for individual parties in financing syndicates, covering both cross-collateralization and cross-default clauses in one single rating score.

Default simulation takes account of attractive loan-to-value ratios, high-performing operating lessees or servicers (in the case of warehouse facilities) as well as residual-value and payment guarantees.

Loss-minimizing instruments are taken into account as well – specifically,

• ECAs (export guarantees),
• Guarantees (payment, residual value, deficiency)
• Collateral (liquidy reserves, maintenance reserves, mobile and immobile assets)

For assessing investment funds’ credit standing. The tool can process anything from equity, bond, money market, and commodity funds all the way to balanced funds and funds of funds. Quantitative factors are determined using a sophisticated portfolio model, which takes account of funds’ country of domicile and asset allocation. Various qualitative criteria are also included.

For assessing the ability of local authorities outside Germany to meet payment obligations in full and on time. Primarily refers to regions and municipalities performing sovereign functions for households and companies in their area and entitled to levy taxes and duties.

Along with qualitative and quantitative data, the analysis includes the political and economic environment and country-specific transfer risk. Structural differences between municipalities and regions are factored in according to the Eurostat NUTS / LAU methodology. The tool uses different rating algorithms, depending on the segment.

For assessing both single-property financing and portfolios in countries other than Germany. The tool covers various financing objectives (e.g., investor with/without construction phase, management of an operator property) and differentiates by all common property types: office, retail, residential, commercial, and operator (especially hotels). It is also capable of recording financing aspects in great detail, including tranches and special repayment rules.

Based on 10,000 scenario simulations for the general economic development (Monte Carlo simulation), covering numerous regional real estate markets. For the scenarios, cash flows are simulated and compared with the debt service, modeling causal structures for the probability of default.

For assessing the default risk of sovereign states. The tool specifies both country and transfer risk  in domestic and in foreign currency. As defaults in domestic currencies occur much less frequently, the tool uses separate models to determine both probabilities.

The tool also determines the risk of transfer events, in which foreign companies are no longer able to meet their payment obligations in foreign currency due to foreign exchange restrictions. (This rating can be accessed by other modules for the purpose of assessing transfer risks.)

Countries are segmented according to their development status; this segmentation is updated annually. Depending on a country’s segment, different rating procedures are used. Similarly, extensive special rules are applied for euro countries, offshore countries, etc.

For assessing German leasing companies stating their accounts in line with the German Commercial Code (HGB). The tool calculates the company’s net asset value and determines the residual value by way of simulation, permitting a detailed modeling of the actual asset value. For international finance deals, the transfer risk is also taken into account.

For assessing highly leveraged company acquisitions, where the debt service will be paid from the target company’s (future) cash flows – i.e., leveraged buyouts (LBO), management buyouts (MBO), and corporate-to-corporate transactions.

The tool determines the probability of default for the debt component, taking into account both senior and subordinated debt. The calculation includes:

• Quantitative factors based on the company’s cash flow and the equity and debt structure of the deal
• Qualitative factors such as contract design, business plan, industry development, etc.
• Extraordinary effects (using overrides or warning signals).

This module can be used for transactions worldwide.

For assessing financing deals for infrastructure projects, such as renewable energy, roads or telecommunications networks, and also large industrial plants. The borrower is usually a special-purpose company. The tool can be used globally and, along with the probability of default, also indicates the LGD ratio and expected loss.

Common project types are grouped in nine segments (such as transport or energy) and roughly 50 sub-segments (such as road and rail projects or power plants with PPA and merchant constellations). The individual financing aspects can be entered in great detail; for international projects, the transfer risk is taken into account.

The tool generates 50,000 scenarios for general economic development (Monte Carlo simulation). It determines expected cash flows (including segment-specific volatilities) and compares these with the debt service, modeling the causal structure for both the probability of default and the loss given default.

For determining the PD, LGD ratio, and expected loss of special-purpose companies for financing individual ships or fleets. The tool is applicable worldwide and covers a wide variety of financing types – from ordinary ship mortgage loans to additional construction-period financing or equity bridge loans.

Ship types are segmented into six categories and more than 40 subcategories.

The tool generates 10,000 scenarios for general economic development (Monte Carlo simulation) and then incorporates the development of the global ship market. This provides the basis for projecting the financed property’s cash flows, which are then compared with the debt service in order to model the causal structure for both the probability of default and loss given default.

A tool for rating insurers. The tool is applicable to all companies generally classified as insurance, or which generate more than 50 percent of their gross operating income from insurance business. As such, the tool is applicable to insurance companies from all sectors as well as to conglomerates with an insurance focus.

Due to the heterogeneity of the industry, the module distinguishes four segments: Life with life and health insurance, Non-Life with property and casualty insurance as well as reinsurance, Re specifically for reinsurance, and Composite for very broadly positioned insurance companies.

In addition to quantitative and qualitative aspects, the tool takes into account companies’ shareholder structure, different national accounting rules, and, in the case of foreign companies, the associated transfer risk.