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1. What is Credit Rating?

Credit rating is an assessment of the probability of default on payment of interest and principal of the issuer, obligor or instrument. It is not a “BUY”, “HOLD” or “SELL” recommendation, it only provides additional input to investors, and investors are required to make their own independent and objective analysis before making any investment decision.

2. What is Credit Rating Agency?

Credit Rating Agency is an institution that assesses creditworthiness of the issuer or instrument for the ability and willingness to honor their obligation with full and timely payment on both principal and interest.

3. How can an issuer or instrument be rated?

• First, the issuer or obligor contacts and requests rating agency for the credit rating.
• Second, discussion needed between both parties for confidentiality and data communication.
• Third, if everything has been agreed during the discussion process, it finally comes down to fee agreement, rating type and estimated timeline of the rating.
• Last, credit analysis is incepted by the rating agency.

4. What does each symbol represent?

Each rating symbol is an alphabetic representation of the probability of degree of repayment risk associated with the issuer or instrument.

5. Is rating symbol given the same to all types of rated issuers or instruments?

No, rating symbol may be given differently from one issuer or instrument to another, depending on the assessment of their ability and willingness to service their obligation by the rating agency.

6. Whether the issuer or instrument is rated by the rating agency?

Credit rating can be assigned to either the issuer or instrument, depending on the need of the obligor.

7. Is credit rating just done only one time?

No, to protect the interest of investors, every credit rating agency shall, during the agreed period of the rated issuer or the lifetime of the instrument, continuously monitor the rating of such the issuer or instrument and carry out periodic review of all published ratings.

8. Who does pay for the credit rating?

The issuer or obligor pays for the credit rating.

9. Who does regulate credit rating agencies in Cambodia?

Credit rating agencies are regulated by the Securities and Exchange Regulator of Cambodia.

10. Why does credit rating change over time?

Rating is an opinion based on information available at a point in time with expectations made on the basis of such information by the rating agency. However, information can change significantly over time causing the rated issuer or instrument performance to deviate from the earlier expectations thereby affecting the future repayment abilities and thus, requiring the rating to be altered.

11. What does a credit rating downgrade indicate?

Credit Rating is monitored throughout the agreed period of the rated issuer or the lifetime of the rated instrument by the rating agency. A downgrade in the rating indicates that the risk of default of the instrument is higher than what was earlier predicted.

12. What are investment and speculative grade ratings?

• An Investment Grade Rating signifies the rating agency’s belief that the rated issuer or instrument is likely to meet its payment obligations.
• A Speculative Grade Rating is considered as “high risk” by the rating agency; therefore, high interest rate is offered to attract investment.